Question 1

When inflation occurs, consumers

Accepted Answer

A)  realize gains in their wealth. 
B)  increase spending to catch up with higher prices. 
C)  automatically shift the consumption line upward. 
D)  suffer a decrease in real wealth. 
A)  realize gains in their wealth. 
B)  increase spending to catch up with higher prices. 
C)  automatically shift the consumption line upward. 
D)  suffer a decrease in real wealth.

Question 2

An improvement in productivity will usually increase profits.

Accepted Answer

A) True 
 B)False

Question 3

The aggregate supply curve shows the relationship between ____ and ____, holding all other factors constant.

Accepted Answer

A)  price level; quantity of real GDP supplied 
B)  price level; supply of nominal GDP 
C)  nominal GDP; price level of real GDP 
D)  price level; amount of nominal GDP supplied 
A)  price level; quantity of real GDP supplied 
B)  price level; supply of nominal GDP 
C)  nominal GDP; price level of real GDP 
D)  price level; amount of nominal GDP supplied

Question 4

The main reason that firms adjust their output when the price level changes is that

Accepted Answer

A)  uncertainty causes a drop in output. 
B)  taxes cause a supply-side reaction. 
C)  their profit margins change. 
D)  increased risks lead to a change in output. 
E)  All of the above are correct. 
A)  uncertainty causes a drop in output. 
B)  taxes cause a supply-side reaction. 
C)  their profit margins change. 
D)  increased risks lead to a change in output. 
E)  All of the above are correct.

Question 5

The economy's self-correcting mechanism appears to be more efficient at curing

Accepted Answer

A)  recessionary gaps by reducing price levels. 
B)  inflationary gaps by reducing price levels. 
C)  unemployment by reducing wage levels. 
D)  inflationary gaps through inflation. 
A)  recessionary gaps by reducing price levels. 
B)  inflationary gaps by reducing price levels. 
C)  unemployment by reducing wage levels. 
D)  inflationary gaps through inflation.

Question 6

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned

Accepted Answer

A)  depletion of inventories, causing firms to raise prices. 
B)  depletion of inventories, causing firms to lower prices. 
C)  accumulation of inventories, causing firms to raise prices. 
D)  accumulation of inventories, causing firms to lower prices. 
A)  depletion of inventories, causing firms to raise prices. 
B)  depletion of inventories, causing firms to lower prices. 
C)  accumulation of inventories, causing firms to raise prices. 
D)  accumulation of inventories, causing firms to lower prices.

Question 7

The aggregate supply curve is the relationship between the price level and the quantity of real GDP purchased.

Accepted Answer

A) True 
 B)False

Question 8

The United States economy in the mid-2000s did not experience stagflation because

Accepted Answer

A)  energy prices declined. 
B)  the energy content of GDP declined. 
C)  the U.S.economy became more volatile since 1980. 
D)  all of the above. 
A)  energy prices declined. 
B)  the energy content of GDP declined. 
C)  the U.S.economy became more volatile since 1980. 
D)  all of the above.

Question 9

If wages or prices of other inputs change, the aggregate supply curve will shift to another position.

Accepted Answer

A) True 
 B)False

Question 10

The concept of aggregate supply refers to a

Accepted Answer

A)  fixed number of output. 
B)  list of products demanded. 
C)  schedule of output. 
D)  schedule of production costs. 
A)  fixed number of output. 
B)  list of products demanded. 
C)  schedule of output. 
D)  schedule of production costs.

Question 11

An increase in wages will cause 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 12

An inflationary gap will occur when

Accepted Answer

A)  real GDP exceeds nominal GDP. 
B)  nominal GDP exceeds real GDP. 
C)  real GDP exceeds potential GDP. 
D)  potential GDP exceeds real GDP 
A)  real GDP exceeds nominal GDP. 
B)  nominal GDP exceeds real GDP. 
C)  real GDP exceeds potential GDP. 
D)  potential GDP exceeds real GDP

Question 13

The 2002-2008 OPEC price increases caused by conflict in the Middle East caused the aggregate

Accepted Answer

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

Question 14

Figure 10-6
  
-In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Accepted Answer

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

Question 15

What causes the aggregate supply curve to have an upward slope in the short run, but a vertical slope in the long run?

Accepted Answer

When there is substantial unemployment i

Question 16

Figure 10-7
  
-Refer to Figure 10-7.Which of the diagrams in Figure 10-7 represents a decrease in consumer spending combined with a positive supply shock?

Accepted Answer

A)  Panels (
A)  & (
B)  
B)  Panels (
C)  & (
D)  
C)  Panels (
A)  & (
C)  
D)  Panels (
B)  & (
D)  
A)  Panels (
A)  & (
B)  
B)  Panels (
C)  & (
D)  
C)  Panels (
A)  & (
C)  
D)  Panels (
B)  & (
D)

Question 17

What is the usual response of firm to an increase in the price of what they sell?

Accepted Answer

A)  An increase in output. 
B)  An increase in hiring factors of production. 
C)  An increase in the profit level of the firm. 
D)  An increase in employment at the firm. 
E)  All of the above. 
A)  An increase in output. 
B)  An increase in hiring factors of production. 
C)  An increase in the profit level of the firm. 
D)  An increase in employment at the firm. 
E)  All of the above.

Question 18

Table 10-1
 $\begin{array}{ccc}
\text { Aggregate Quantity }&\text { Aggregate Quantity }\
\begin{array}{c}
\text { Demanded } \
\text { (billions) }
\end{array} & \begin{array}{c}
\text { Supplied } \
\text { (billions) }
\end{array} & \begin{array}{c}
\text { Price } \
\text { Level }
\end{array} \
\hline \$ 3500 & \$ 2900 & 65 \
3400 & 3000 & 75 \
3350 & 3150 & 90 \
3250 & 3250 & 110 \
3100 & 3400 & 130
\end{array}$
-In Table 10-1, if full employment occurs at $3,100 billion, then

Accepted Answer

A)  the economy experiences a recessionary gap of $150 billion. 
B)  the economy experiences a recessionary gap of $300 billion. 
C)  the economy experiences an inflationary gap of $150 billion. 
D)  the economy experiences an inflationary gap of $300 billion. 
A)  the economy experiences a recessionary gap of $150 billion. 
B)  the economy experiences a recessionary gap of $300 billion. 
C)  the economy experiences an inflationary gap of $150 billion. 
D)  the economy experiences an inflationary gap of $300 billion.

Question 19

Figure 10-3
  
-In Figure 10-3, both graphs (a) and (b) indicate that the economy is experiencing a(n)

Accepted Answer

A)  recessionary gap of RE. 
B)  recessionary gap of RG. 
C)  inflationary gap of RG. 
D)  inflationary gap of RE. 
A)  recessionary gap of RE. 
B)  recessionary gap of RG. 
C)  inflationary gap of RG. 
D)  inflationary gap of RE.

Question 20

As long as the aggregate supply curve is upward sloping, an increase in aggregate demand will increase

Accepted Answer

A)  real wealth. 
B)  price levels. 
C)  unemployment. 
D)  net exports. 
A)  real wealth. 
B)  price levels. 
C)  unemployment. 
D)  net exports.

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

When inflation occurs, consumers

An improvement in productivity will usually increase profits.

The aggregate supply curve shows the relationship between ____ and ____, holding all other factors constant.

The main reason that firms adjust their output when the price level changes is that

The economy's self-correcting mechanism appears to be more efficient at curing

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned

The aggregate supply curve is the relationship between the price level and the quantity of real GDP purchased.

The United States economy in the mid-2000s did not experience stagflation because

If wages or prices of other inputs change, the aggregate supply curve will shift to another position.

The concept of aggregate supply refers to a

An increase in wages will cause the aggregate supply curve to

An inflationary gap will occur when

The 2002-2008 OPEC price increases caused by conflict in the Middle East caused the aggregate

Figure 10-6 -In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

What causes the aggregate supply curve to have an upward slope in the short run, but a vertical slope in the long run?

Figure 10-7 -Refer to Figure 10-7.Which of the diagrams in Figure 10-7 represents a decrease in consumer spending combined with a positive supply shock?

What is the usual response of firm to an increase in the price of what they sell?

Table 10-1 Aggregate Quantity Aggregate Quantity Demanded (billions) Supplied (billions) Price Level \ 3500 \ 2900 65 3400 3000 75 3350 3150 90 3250 3250 110 3100 3400 130 -In Table 10-1, if full employment occurs at $3,100 billion, then

Figure 10-3 -In Figure 10-3, both graphs (a) and (b) indicate that the economy is experiencing a(n)

As long as the aggregate supply curve is upward sloping, an increase in aggregate demand will increase

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

Filters

The aggregate supply curve shows the relationship between and , holding all other factors constant.