Question 1

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

Accepted Answer

A)  demand curve to shift outward. 
B)  supply curve to shift outward. 
C)  supply curve to shift inward. 
D)  demand curve to become flatter. 
A)  demand curve to shift outward. 
B)  supply curve to shift outward. 
C)  supply curve to shift inward. 
D)  demand curve to become flatter.

Question 2

The aggregate supply curve will shift to the left if

Accepted Answer

A)  energy prices fall. 
B)  technology and productivity increase in the economy. 
C)  the capital stock of the economy increases. 
D)  the money wage rate increases. 
A)  energy prices fall. 
B)  technology and productivity increase in the economy. 
C)  the capital stock of the economy increases. 
D)  the money wage rate increases.

Question 3

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

Accepted Answer

A)  inflation whenever supply increases. 
B)  production below potential GDP. 
C)  production above potential GDP. 
D)  rapid price increases when demand changes. 
A)  inflation whenever supply increases. 
B)  production below potential GDP. 
C)  production above potential GDP. 
D)  rapid price increases when demand changes.

Question 4

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

Accepted Answer

A) True 
 B)False

Question 5

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Accepted Answer

A) True 
 B)False

Question 6

Figure 10-6
  
-In Figure 10-6, which graph best illustrates an autonomous increase in consumption spending?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) 
A)  (1) 
B)  (2) 
C)  (3) 
D)  (4)

Question 7

If the price level rises, what will happen to the level of real GDP supplied?

Accepted Answer

A)  It will usually decrease. 
B)  It will usually increase. 
C)  Nothing. 
D)  It will decrease at first and then increase. 
A)  It will usually decrease. 
B)  It will usually increase. 
C)  Nothing. 
D)  It will decrease at first and then increase.

Question 8

The OPEC production cuts of 1999-2000 increased energy prices and caused the aggregate supply curve to

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  become flatter. 
D)  become steeper. 
A)  shift outward. 
B)  shift inward. 
C)  become flatter. 
D)  become steeper.

Question 9

Recessionary gaps are associated with output below potential and high unemployment rates.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following situations would cause a period of stagflation at a later point in time?

Accepted Answer

A)  a recessionary gap 
B)  a reduction in investment spending 
C)  an increase in technological development 
D)  an inflationary gap 
A)  a recessionary gap 
B)  a reduction in investment spending 
C)  an increase in technological development 
D)  an inflationary gap

Question 11

An inflationary gap exists when consumers

Accepted Answer

A)  are saving more than businesses are investing. 
B)  and businesses are purchasing less than the economy is capable of producing. 
C)  and businesses are demanding more than the economy is capable of producing. 
D)  and businesses are demanding less than the full employment level of output. 
A)  are saving more than businesses are investing. 
B)  and businesses are purchasing less than the economy is capable of producing. 
C)  and businesses are demanding more than the economy is capable of producing. 
D)  and businesses are demanding less than the full employment level of output.

Question 12

How are aggregate supply and stagflation related?

Accepted Answer

A)  Stagflation usually causes an adverse shift in aggregate supply. 
B)  An adverse supply shift usually causes stagflation. 
C)  Stagflation only follows inflation, with no relation to aggregate supply. 
D)  There is no relationship between the two. 
A)  Stagflation usually causes an adverse shift in aggregate supply. 
B)  An adverse supply shift usually causes stagflation. 
C)  Stagflation only follows inflation, with no relation to aggregate supply. 
D)  There is no relationship between the two.

Question 13

When an inflationary gap exists, the job prospects of new college graduates are

Accepted Answer

A)  very dim. 
B)  somewhat encouraging. 
C)  worse in comparison to a recessionary gap. 
D)  excellent. 
A)  very dim. 
B)  somewhat encouraging. 
C)  worse in comparison to a recessionary gap. 
D)  excellent.

Question 14

The case for government stabilization policy is made more compelling if the

Accepted Answer

A)  self-correcting mechanism works very slowly. 
B)  self-correcting mechanism works too fast. 
C)  value of the multiplier is very small. 
D)  aggregate supply curve is very flat. 
A)  self-correcting mechanism works very slowly. 
B)  self-correcting mechanism works too fast. 
C)  value of the multiplier is very small. 
D)  aggregate supply curve is very flat.

Question 15

How is it possible for the economy to have a recessionary gap?

Accepted Answer

A)  Equilibrium is at a GDP level below full employment. 
B)  Equilibrium is at a GDP level equal to full employment. 
C)  Equilibrium is at a GDP level above full employment. 
D)  GDP is rising at full employment. 
E)  GDP is falling at full employment. 
A)  Equilibrium is at a GDP level below full employment. 
B)  Equilibrium is at a GDP level equal to full employment. 
C)  Equilibrium is at a GDP level above full employment. 
D)  GDP is rising at full employment. 
E)  GDP is falling at full employment.

Question 16

Stagflation is the conjunction of

Accepted Answer

A)  stagnation and recession. 
B)  inflation and stagnation. 
C)  depression and inflation. 
D)  stagnation and deflation. 
A)  stagnation and recession. 
B)  inflation and stagnation. 
C)  depression and inflation. 
D)  stagnation and deflation.

Question 17

One reason the oversimplified multiplier is incorrect is that inflation

Accepted Answer

A)  increases the multiplier by increasing investment spending. 
B)  increases the multiplier by increasing consumer spending. 
C)  decreases the multiplier by increasing net exports. 
D)  decreases the multiplier by decreasing consumer spending. 
A)  increases the multiplier by increasing investment spending. 
B)  increases the multiplier by increasing consumer spending. 
C)  decreases the multiplier by increasing net exports. 
D)  decreases the multiplier by decreasing consumer spending.

Question 18

The existence of an inflationary gap should cause

Accepted Answer

A)  wages to fall. 
B)  prices to fall. 
C)  unemployment to rise. 
D)  net exports to rise. 
A)  wages to fall. 
B)  prices to fall. 
C)  unemployment to rise. 
D)  net exports to rise.

Question 19

Decreasing profit margins indicate a need to increase production in an economy.

Accepted Answer

A) True 
 B)False

Question 20

One complication that tends to prolong recessionary gaps is that wages

Accepted Answer

A)  are fixed by unions, which represent nearly all workers in the United States. 
B)  tend to rise rapidly. 
C)  rarely fall. 
D)  tend to move in the opposite direction from prices. 
A)  are fixed by unions, which represent nearly all workers in the United States. 
B)  tend to rise rapidly. 
C)  rarely fall. 
D)  tend to move in the opposite direction from prices.

Exam 27: Bringing in the Supply Side: Unemployment and Inflation?

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

The aggregate supply curve will shift to the left if

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Figure 10-6 -In Figure 10-6, which graph best illustrates an autonomous increase in consumption spending?

If the price level rises, what will happen to the level of real GDP supplied?

The OPEC production cuts of 1999-2000 increased energy prices and caused the aggregate supply curve to

Recessionary gaps are associated with output below potential and high unemployment rates.

Which of the following situations would cause a period of stagflation at a later point in time?

An inflationary gap exists when consumers

How are aggregate supply and stagflation related?

When an inflationary gap exists, the job prospects of new college graduates are

The case for government stabilization policy is made more compelling if the

How is it possible for the economy to have a recessionary gap?

Stagflation is the conjunction of

One reason the oversimplified multiplier is incorrect is that inflation

The existence of an inflationary gap should cause

Decreasing profit margins indicate a need to increase production in an economy.

One complication that tends to prolong recessionary gaps is that wages

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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