Question 1

If money wages increase, the most likely result is a(n)

Accepted Answer

A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  steeper aggregate supply curve. 
D)  flatter aggregate supply curve. 
A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  steeper aggregate supply curve. 
D)  flatter aggregate supply curve.

Question 2

The Japanese economy has been consistently weak throughout the 1990s.This has caused a slight deflation, illustrating the

Accepted Answer

A)  negligible cost of eliminating inflation. 
B)  very slow operation of the economy's self-correcting mechanism. 
C)  tendency of inflation to accelerate during recessions. 
D)  rapidity with which inflation can be stopped. 
A)  negligible cost of eliminating inflation. 
B)  very slow operation of the economy's self-correcting mechanism. 
C)  tendency of inflation to accelerate during recessions. 
D)  rapidity with which inflation can be stopped.

Question 3

Wage increases are resisted by firms because they decrease profits.

Accepted Answer

A) True 
 B)False

Question 4

The existence of an inflationary gap or an recessionary gap depends on the

Accepted Answer

A)  aggregate supply only. 
B)  expenditure schedule. 
C)  leakages schedule. 
D)  injections schedule. 
E)  aggregate demand and aggregate supply schedules. 
A)  aggregate supply only. 
B)  expenditure schedule. 
C)  leakages schedule. 
D)  injections schedule. 
E)  aggregate demand and aggregate supply schedules.

Question 5

In our modern economy, the adjustment process necessary to eliminate a recessionary gap is very rapid.

Accepted Answer

A) True 
 B)False

Question 6

Distinguish between a movement along the aggregate supply curve and a shift of the entire aggregate supply curve.What factors cause each to occur?

Accepted Answer

The aggregate supply curve is analogous

Question 7

The aggregate supply curve normally

Accepted Answer

A)  slopes downward and to the right due to higher resource prices. 
B)  has a horizontal slope equal to zero. 
C)  is very steep in the lower portion and flatter in the upper portion. 
D)  slopes upward to the right due to short-run fixed costs of production. 
A)  slopes downward and to the right due to higher resource prices. 
B)  has a horizontal slope equal to zero. 
C)  is very steep in the lower portion and flatter in the upper portion. 
D)  slopes upward to the right due to short-run fixed costs of production.

Question 8

The relationship between the price level and the quantity of real GDP supplied is

Accepted Answer

A)  full employment output. 
B)  inflationary or recessionary gap. 
C)  aggregate supply. 
D)  supply-side equilibrium. 
A)  full employment output. 
B)  inflationary or recessionary gap. 
C)  aggregate supply. 
D)  supply-side equilibrium.

Question 9

An inflationary gap will exist when

Accepted Answer

A)  aggregate demand grows more slowly than aggregate supply. 
B)  there is downward pressure on prices. 
C)  expenditures are not equal to aggregate demand. 
D)  equilibrium GDP is greater than full employment GDP. 
A)  aggregate demand grows more slowly than aggregate supply. 
B)  there is downward pressure on prices. 
C)  expenditures are not equal to aggregate demand. 
D)  equilibrium GDP is greater than full employment GDP.

Question 10

Over time, aggregate demand and aggregate supply grow by the same amount.

Accepted Answer

A) True 
 B)False

Question 11

If scientific research produces a technological breakthrough in the production of computer memory, then

Accepted Answer

A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase, allowing businesses to cut back production. 
A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase, allowing businesses to cut back production.

Question 12

Aggregate supply can be thought of as

Accepted Answer

A)  a fixed amount of output. 
B)  unrelated to the price level. 
C)  a schedule of output at different price levels. 
D)  the volume of goods at the ends of the production possibilities curve. 
A)  a fixed amount of output. 
B)  unrelated to the price level. 
C)  a schedule of output at different price levels. 
D)  the volume of goods at the ends of the production possibilities curve.

Question 13

If the data show that periods of high economic growth rate accompanied by high inflation rates, then changes in aggregate demand are the primary source of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 14

Figure 10-3
  
-In Figure 10-3, we would expect the aggregate supply curve in graph (b) to eventually

Accepted Answer

A)  shift to the right, eliminating the recessionary gap. 
B)  shift to the left, eliminating the inflationary gap. 
C)  become steeper in the upper portion, eliminating the inflationary gap. 
D)  become flatter in the upper portion, eliminating the recessionary gap. 
A)  shift to the right, eliminating the recessionary gap. 
B)  shift to the left, eliminating the inflationary gap. 
C)  become steeper in the upper portion, eliminating the inflationary gap. 
D)  become flatter in the upper portion, eliminating the recessionary gap.

Question 15

The aggregate supply curve is drawn with

Accepted Answer

A)  the price level on the vertical axis and nominal GDP on the horizontal. 
B)  nominal GDP on the vertical axis and real GDP on the horizontal. 
C)  the price level on the vertical axis and real GDP on the horizontal. 
D)  real GDP on the horizontal and the rate of inflation on the vertical. 
A)  the price level on the vertical axis and nominal GDP on the horizontal. 
B)  nominal GDP on the vertical axis and real GDP on the horizontal. 
C)  the price level on the vertical axis and real GDP on the horizontal. 
D)  real GDP on the horizontal and the rate of inflation on the vertical.

Question 16

Increases in the availability of natural resources will affect the aggregate supply curve such that it

Accepted Answer

A)  shifts inward and becomes flatter. 
B)  shifts inward. 
C)  shifts outward. 
D)  becomes flatter. 
E)  becomes steeper. 
A)  shifts inward and becomes flatter. 
B)  shifts inward. 
C)  shifts outward. 
D)  becomes flatter. 
E)  becomes steeper.

Question 17

The money wage rate has little effect on the supply curve.It mainly affects the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 18

When money wages rise, the most significant effect on the aggregate supply curve is that it

Accepted Answer

A)  shifts outward. 
B)  shifts inward. 
C)  becomes flatter. 
D)  becomes steeper. 
A)  shifts outward. 
B)  shifts inward. 
C)  becomes flatter. 
D)  becomes steeper.

Question 19

Self correcting mechanism reveals that

Accepted Answer

A)  real wages will increase if there is an increase in price. 
B)  nominal wages will fall if there is inflationary gap. 
C)  nominal wages will increase if there is recessionary gap. 
D)  in the long run economy will be in equilibrium at potential GDP. 
A)  real wages will increase if there is an increase in price. 
B)  nominal wages will fall if there is inflationary gap. 
C)  nominal wages will increase if there is recessionary gap. 
D)  in the long run economy will be in equilibrium at potential GDP.

Question 20

The slope of the aggregate supply curve is

Accepted Answer

A)  perfectly vertical. 
B)  perfectly horizontal. 
C)  upward. 
D)  downward. 
A)  perfectly vertical. 
B)  perfectly horizontal. 
C)  upward. 
D)  downward.

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

If money wages increase, the most likely result is a(n)

The Japanese economy has been consistently weak throughout the 1990s.This has caused a slight deflation, illustrating the

Wage increases are resisted by firms because they decrease profits.

The existence of an inflationary gap or an recessionary gap depends on the

In our modern economy, the adjustment process necessary to eliminate a recessionary gap is very rapid.

Distinguish between a movement along the aggregate supply curve and a shift of the entire aggregate supply curve.What factors cause each to occur?

The aggregate supply curve normally

The relationship between the price level and the quantity of real GDP supplied is

An inflationary gap will exist when

Over time, aggregate demand and aggregate supply grow by the same amount.

If scientific research produces a technological breakthrough in the production of computer memory, then

Aggregate supply can be thought of as

If the data show that periods of high economic growth rate accompanied by high inflation rates, then changes in aggregate demand are the primary source of economic fluctuations.

Figure 10-3 -In Figure 10-3, we would expect the aggregate supply curve in graph (b) to eventually

The aggregate supply curve is drawn with

Increases in the availability of natural resources will affect the aggregate supply curve such that it

The money wage rate has little effect on the supply curve.It mainly affects the aggregate demand curve.

When money wages rise, the most significant effect on the aggregate supply curve is that it

Self correcting mechanism reveals that

The slope of the aggregate supply curve is

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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