Question 1

Figure 10-7
​   ​
-If an economy is growing, but experiences no inflation, this means

Accepted Answer

A) aggregate demand increased, but aggregate supply did not. 
B) aggregate supply decreased, but aggregate demand did not. 
C) aggregate demand and aggregate supply increased by the same amount. 
D) aggregate demand and aggregate supply decreased by the same amount. 
A) aggregate demand increased, but aggregate supply did not. 
B) aggregate supply decreased, but aggregate demand did not. 
C) aggregate demand and aggregate supply increased by the same amount. 
D) aggregate demand and aggregate supply decreased by the same amount.

Question 2

What is the principal reason that economists give for the existence of deflationary and inflationary gaps?

Accepted Answer

A) Wages are flexible in the short run. 
B) Wages are flexible in the long run. 
C) Wages are fixed in the long run. 
D) Wages are fixed in the short run. 
A) Wages are flexible in the short run. 
B) Wages are flexible in the long run. 
C) Wages are fixed in the long run. 
D) Wages are fixed in the short run.

Question 3

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 4

At levels of output close to full employment, the aggregate supply curve is probably

Accepted Answer

A) very flat. 
B) very steep. 
C) sloped downward. 
D) perfectly elastic. 
A) very flat. 
B) very steep. 
C) sloped downward. 
D) perfectly elastic.

Question 5

Figure 10-4
​  
-In Figure 10-4, if full employment occurs at 5,000 and the price level is currently 130, then we can expect the

Accepted Answer

A) aggregate supply curve to shift to the left until a new equilibrium is established at an output level of 4,000. 
B) aggregate demand curve to shift to the right until a new equilibrium is established at an output level of 6,000. 
C) price level to fall to 110. 
D) aggregate demand to shift to the left and aggregate supply to shift to the right until the price level reaches 130. 
A) aggregate supply curve to shift to the left until a new equilibrium is established at an output level of 4,000. 
B) aggregate demand curve to shift to the right until a new equilibrium is established at an output level of 6,000. 
C) price level to fall to 110. 
D) aggregate demand to shift to the left and aggregate supply to shift to the right until the price level reaches 130.

Question 6

The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Accepted Answer

A) absorbed by price changes. 
B) saved rather than spent. 
C) matched by changes in supply. 
D) matched by changes in income. 
A) absorbed by price changes. 
B) saved rather than spent. 
C) matched by changes in supply. 
D) matched by changes in income.

Question 7

Which of the following is evidence of an inflationary gap?

Accepted Answer

A) Very long lines at employment agencies 
B) Very short waiting times for product delivery 
C) Very low sales figures 
D) Very long search times for people looking for jobs 
E) Very low unemployment rates 
A) Very long lines at employment agencies 
B) Very short waiting times for product delivery 
C) Very low sales figures 
D) Very long search times for people looking for jobs 
E) Very low unemployment rates

Question 8

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

Accepted Answer

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

Question 9

A decrease in the price of resources 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 10

As the U.S.labor force grows and the nation's capital stock is augmented by investment, the

Accepted Answer

A) price level will rise. 
B) aggregate supply curve shifts inward. 
C) aggregate supply curve shifts outward. 
D) aggregate supply curve becomes steeper. 
A) price level will rise. 
B) aggregate supply curve shifts inward. 
C) aggregate supply curve shifts outward. 
D) aggregate supply curve becomes steeper.

Question 11

Figure 10-4
​  
-A recessionary gap exists 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 12

Using the aggregate demand/aggregate supply model, explain the difference in the employment prospects of the graduates of 2007 and 2009.

Accepted Answer

The graduates of 2007 were facing an eco

Question 13

Discuss some of the arguments that help explain why wages and prices rarely fall in a modern economy.

Accepted Answer

Institutional factors such as minimum wa

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-1
​  
-In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Accepted Answer

A) $6,000 billion real GDP and price level of 110 
B) $5,000 billion real GDP and price level of 120 
C) $5,000 billion real GDP and price level of 110 
D) $7,500 billion real GDP and price level of 100 
A) $6,000 billion real GDP and price level of 110 
B) $5,000 billion real GDP and price level of 120 
C) $5,000 billion real GDP and price level of 110 
D) $7,500 billion real GDP and price level of 100

Question 16

Figure 10-5  
-According to Baumol and Blinder, does the U.S.economy have a self-correcting mechanism?

Accepted Answer

A) No, there is no such thing in reality. 
B) Yes, and it works very rapidly. 
C) Yes, and it works very slowly. 
D) No, unless the aggregate supply curve is perfectly flat. 
A) No, there is no such thing in reality. 
B) Yes, and it works very rapidly. 
C) Yes, and it works very slowly. 
D) No, unless the aggregate supply curve is perfectly flat.

Question 17

What would be the likely result of a recessionary gap? If this leads to a fall in the nominal wage what impact it would have on the aggregate supply curve and on recessionary gap?

Accepted Answer

With equilibrium GDP below potential GDP

Question 18

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Accepted Answer

A) True 
 B)False

Question 19

Figure 10-2
​  
-In Figure 10-2, which segment of the aggregate supply curve has the largest multiplier effect?

Accepted Answer

A) AB 
B) BC 
C) CD 
D) DG 
A) AB 
B) BC 
C) CD 
D) DG

Question 20

The major cost of production in the economy is

Accepted Answer

A) interest expense. 
B) capital costs. 
C) rents. 
D) profits. 
E) wages. 
A) interest expense. 
B) capital costs. 
C) rents. 
D) profits. 
E) wages.

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

Figure 10-7 ​ ​ -If an economy is growing, but experiences no inflation, this means

What is the principal reason that economists give for the existence of deflationary and inflationary gaps?

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

At levels of output close to full employment, the aggregate supply curve is probably

Figure 10-4 ​ -In Figure 10-4, if full employment occurs at 5,000 and the price level is currently 130, then we can expect the

The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Which of the following is evidence of an inflationary gap?

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

A decrease in the price of resources will cause the aggregate supply curve to

As the U.S.labor force grows and the nation's capital stock is augmented by investment, the

Figure 10-4 ​ -A recessionary gap exists when

Using the aggregate demand/aggregate supply model, explain the difference in the employment prospects of the graduates of 2007 and 2009.

Discuss some of the arguments that help explain why wages and prices rarely fall in a modern economy.

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

Figure 10-1 ​ -In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Figure 10-5 -According to Baumol and Blinder, does the U.S.economy have a self-correcting mechanism?

What would be the likely result of a recessionary gap? If this leads to a fall in the nominal wage what impact it would have on the aggregate supply curve and on recessionary gap?

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Figure 10-2 ​ -In Figure 10-2, which segment of the aggregate supply curve has the largest multiplier effect?

The major cost of production in the economy is

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 10-7 -If an economy is growing, but experiences no inflation, this means

Figure 10-4 -In Figure 10-4, if full employment occurs at 5,000 and the price level is currently 130, then we can expect the

Figure 10-4 -A recessionary gap exists when

Figure 10-1 -In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Figure 10-2 -In Figure 10-2, which segment of the aggregate supply curve has the largest multiplier effect?