Question 1

Economists generally assume that there is a short-run trade-off between

Accepted Answer

A) output and employment. 
B) inflation and employment. 
C) deflation and unemployment. 
D) inflation and unemployment. 
E) output and growth. 
A) output and employment. 
B) inflation and employment. 
C) deflation and unemployment. 
D) inflation and unemployment. 
E) output and growth.

Question 2

Profit per unit can be expressed as price − cost per unit.

Accepted Answer

A) True 
 B)False

Question 3

The aggregate supply curve slopes upward because firms

Accepted Answer

A) seek to maximize profits and output. 
B) normally can purchase inputs at fixed prices. 
C) employ technology, which is always fixed. 
D) purchase inputs whose prices rise as output rises. 
A) seek to maximize profits and output. 
B) normally can purchase inputs at fixed prices. 
C) employ technology, which is always fixed. 
D) purchase inputs whose prices rise as output rises.

Question 4

Figure 10-9
​  
-One of the justifications of government stabilization policy is that it may

Accepted Answer

A) increase the fluctuations in inflation and employment. 
B) increase the multiplier effect of changes in autonomous spending. 
C) increase the volatility of economic variables. 
D) reduce the severity of inflation and unemployment. 
A) increase the fluctuations in inflation and employment. 
B) increase the multiplier effect of changes in autonomous spending. 
C) increase the volatility of economic variables. 
D) reduce the severity of inflation and unemployment.

Question 5

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

Accepted Answer

A) growth in aggregate demand. 
B) growth in aggregate supply. 
C) a reduction in aggregate demand. 
D) a reduction in aggregate supply. 
A) growth in aggregate demand. 
B) growth in aggregate supply. 
C) a reduction in aggregate demand. 
D) a reduction in aggregate supply.

Question 6

When economists refer to the economy's self-correcting mechanism, they are referring to the fact that the

Accepted Answer

A) economy will react automatically to a recessionary gap through inflation. 
B) economy will react automatically to an inflationary gap through deflation. 
C) economy will react automatically to an inflationary gap through inflation. 
D) simple multiplier is greater than the complex multiplier. 
A) economy will react automatically to a recessionary gap through inflation. 
B) economy will react automatically to an inflationary gap through deflation. 
C) economy will react automatically to an inflationary gap through inflation. 
D) simple multiplier is greater than the complex multiplier.

Question 7

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 8

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

Question 9

When the price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

Accepted Answer

As long as the aggregate supply curve sl

Question 10

Figure 10-9
​  
-Figure 10-9 illustrates a period of

Accepted Answer

A) economic growth and high inflation. 
B) economic growth and low inflation. 
C) economic recession and high inflation. 
D) economic recession and low inflation. 
A) economic growth and high inflation. 
B) economic growth and low inflation. 
C) economic recession and high inflation. 
D) economic recession and low inflation.

Question 11

When the inflationary gap is finally eliminated, a long-run equilibrium is established with a ____ price level and with GDP ____ potential GDP.

Accepted Answer

A) higher; equal to 
B) higher; greater than 
C) lower; equal to 
D) lower; greater than 
A) higher; equal to 
B) higher; greater than 
C) lower; equal to 
D) lower; greater than

Question 12

Improvements in productivity shift the aggregate supply curve outward.

Accepted Answer

A) True 
 B)False

Question 13

Recessionary gap is the amount by which the equilibrium level of real GDP exceeds potential GDP.

Accepted Answer

A) True 
 B)False

Question 14

Aggregate supply is defined as

Accepted Answer

A) how much the economy can produce at zero unemployment. 
B) an amount of output the economy will produce at full employment. 
C) the relationship between the expenditures schedule and the leakages schedule. 
D) the relationship between the price level and the quantity of real GDP supplied. 
A) how much the economy can produce at zero unemployment. 
B) an amount of output the economy will produce at full employment. 
C) the relationship between the expenditures schedule and the leakages schedule. 
D) the relationship between the price level and the quantity of real GDP supplied.

Question 15

The aggregate supply curve is

Accepted Answer

A) generally flatter as the level of resource use rises. 
B) never vertical, even at full employment. 
C) relatively flat at low levels of output. 
D) relatively steep at low levels of output. 
A) generally flatter as the level of resource use rises. 
B) never vertical, even at full employment. 
C) relatively flat at low levels of output. 
D) relatively steep at low levels of output.

Question 16

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 17

From 2005 to 2006, the U.S.economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

Accepted Answer

A) True 
 B)False

Question 18

The aggregate supply curve slopes upward because as price rises, the quantity of output supplied rises.

Accepted Answer

A) True 
 B)False

Question 19

A severe hurricane hits Florida, destroying large amounts of the citrus crop.What is the most likely effect of this on the aggregate supply?

Accepted Answer

A) It will remain unchanged. 
B) No effect; the economy will move along the curve to a higher price level. 
C) No effect; the economy will move along the curve to a lower price level. 
D) It will increase. 
E) It will decrease. 
A) It will remain unchanged. 
B) No effect; the economy will move along the curve to a higher price level. 
C) No effect; the economy will move along the curve to a lower price level. 
D) It will increase. 
E) It will decrease.

Question 20

If the price level rises, what will happen to aggregate supply curve?

Accepted Answer

A) It will shift outward. 
B) It will shift inward. 
C) Nothing. 
D) It will get steeper. 
E) It will get flatter. 
A) It will shift outward. 
B) It will shift inward. 
C) Nothing. 
D) It will get steeper. 
E) It will get flatter.

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

Economists generally assume that there is a short-run trade-off between

Profit per unit can be expressed as price − cost per unit.

The aggregate supply curve slopes upward because firms

Figure 10-9 ​ -One of the justifications of government stabilization policy is that it may

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

When economists refer to the economy's self-correcting mechanism, they are referring to the fact that the

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

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

When the price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

Figure 10-9 ​ -Figure 10-9 illustrates a period of

When the inflationary gap is finally eliminated, a long-run equilibrium is established with a ____ price level and with GDP ____ potential GDP.

Improvements in productivity shift the aggregate supply curve outward.

Recessionary gap is the amount by which the equilibrium level of real GDP exceeds potential GDP.

Aggregate supply is defined as

The aggregate supply curve is

The aggregate supply curve normally

From 2005 to 2006, the U.S.economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

The aggregate supply curve slopes upward because as price rises, the quantity of output supplied rises.

A severe hurricane hits Florida, destroying large amounts of the citrus crop.What is the most likely effect of this on the aggregate supply?

If the price level rises, what will happen to aggregate supply curve?

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 10-9 -One of the justifications of government stabilization policy is that it may

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

Figure 10-9 -Figure 10-9 illustrates a period of

When the inflationary gap is finally eliminated, a long-run equilibrium is established with a price level and with GDP potential GDP.