Question 1

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 2

Figure 10-4
​  
-In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Accepted Answer

A) increase in autonomous consumer spending that shifts the aggregate demand curve to the left. 
B) increase in wages that will shift the aggregate supply curve to the left. 
C) decrease in investment spending that shifts the aggregate demand curve to the left. 
D) decrease in wages that will shift the aggregate supply curve to the left. 
A) increase in autonomous consumer spending that shifts the aggregate demand curve to the left. 
B) increase in wages that will shift the aggregate supply curve to the left. 
C) decrease in investment spending that shifts the aggregate demand curve to the left. 
D) decrease in wages that will shift the aggregate supply curve to the left.

Question 3

Supply-side economics concerns itself with the interaction between demand and supply, the price level, and real GDP.

Accepted Answer

A) True 
 B)False

Question 4

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 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

Figure 10-6
​  
-In Figure 10-6, which graph best illustrates an adverse supply shock accompanied by an increase in government spending?

Accepted Answer

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

Question 7

An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

Accepted Answer

A) True 
 B)False

Question 8

When equilibrium GDP is below potential GDP, jobs are plentiful and unemployment is low.

Accepted Answer

A) True 
 B)False

Question 9

If the price level decreases, 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 10

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 11

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

Accepted Answer

A) deflationary gap. 
B) recessionary gap. 
C) inflationary gap. 
D) reflationary gap. 
A) deflationary gap. 
B) recessionary gap. 
C) inflationary gap. 
D) reflationary gap.

Question 12

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 13

Why is it possible that the economy will not self-correct out of a recessionary gap?

Accepted Answer

Unlike the case of an inflationary gap,

Question 14

A company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold.Which of the following would happen?

Accepted Answer

A) Total revenue of the company will fall. 
B) Investment by the company will increase. 
C) Profit per unit of the product will fall. 
D) Average profit per unit will increase. 
A) Total revenue of the company will fall. 
B) Investment by the company will increase. 
C) Profit per unit of the product will fall. 
D) Average profit per unit will increase.

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 axis 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 axis and the rate of inflation on the vertical.

Question 16

Figure 10-7
​   ​
-Which of the diagrams in Figure 10-7 shows an economic expansion caused primarily by a change in aggregate demand?

Accepted Answer

A) (
A)  
B) (
B)  
C) (
C)  
D) (
D)  
A) (
A)  
B) (
B)  
C) (
C)  
D) (
D)

Question 17

The federal government increases spending by $50 billion, and the main effect is an increase in the price level.It must be true that the economy is operating on the

Accepted Answer

A) horizontal portion of the aggregate demand curve. 
B) horizontal portion of the aggregate supply curve. 
C) vertical portion of the aggregate supply curve. 
D) vertical portion of the aggregate demand curve. 
A) horizontal portion of the aggregate demand curve. 
B) horizontal portion of the aggregate supply curve. 
C) vertical portion of the aggregate supply curve. 
D) vertical portion of the aggregate demand curve.

Question 18

Figure 10-7
​   ​
-Which of the diagrams in Figure 10-7 shows an economic recession caused primarily by a change aggregate demand?

Accepted Answer

A) (
A)  
B) (
B)  
C) (
C)  
D) (
D)  
A) (
A)  
B) (
B)  
C) (
C)  
D) (
D)

Question 19

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 20

The fact that severe fluctuations in inflation and unemployment are socially undesirable helps make the case for

Accepted Answer

A) a "hands off" policy by the government. 
B) fixed prices and wages. 
C) active government stabilization policy. 
D) restrictions on imports from low wage countries. 
A) a "hands off" policy by the government. 
B) fixed prices and wages. 
C) active government stabilization policy. 
D) restrictions on imports from low wage countries.

Exam 26: Bringing in the Supply Side: Unemployment and Inflation

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

Figure 10-4 ​ -In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Supply-side economics concerns itself with the interaction between demand and supply, the price level, and real GDP.

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

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

Figure 10-6 ​ -In Figure 10-6, which graph best illustrates an adverse supply shock accompanied by an increase in government spending?

An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

When equilibrium GDP is below potential GDP, jobs are plentiful and unemployment is low.

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

An inflationary gap will exist when

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

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

Why is it possible that the economy will not self-correct out of a recessionary gap?

A company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold.Which of the following would happen?

The aggregate supply curve is drawn with

Figure 10-7 ​ ​ -Which of the diagrams in Figure 10-7 shows an economic expansion caused primarily by a change in aggregate demand?

The federal government increases spending by $50 billion, and the main effect is an increase in the price level.It must be true that the economy is operating on the

Figure 10-7 ​ ​ -Which of the diagrams in Figure 10-7 shows an economic recession caused primarily by a change aggregate demand?

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

The fact that severe fluctuations in inflation and unemployment are socially undesirable helps make the case for

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 10-4 -In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Figure 10-6 -In Figure 10-6, which graph best illustrates an adverse supply shock accompanied by an increase in government spending?

Figure 10-7 -Which of the diagrams in Figure 10-7 shows an economic expansion caused primarily by a change in aggregate demand?

Figure 10-7 -Which of the diagrams in Figure 10-7 shows an economic recession caused primarily by a change aggregate demand?