Question 1

The aggregate supply curve is shifted to the left ( inward) by

Accepted Answer

A) an increase in the price of any input to the production process. 
B) a decrease in the price of any input to the production process. 
C) the price of any input staying the same. 
D) None of the above is correct. 
A) an increase in the price of any input to the production process. 
B) a decrease in the price of any input to the production process. 
C) the price of any input staying the same. 
D) None of the above is correct.

Question 2

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.

Question 3

Figure 10-1
​  
-If the price level in Figure 10-1 were 120,

Accepted Answer

A) there would be excess goods on the market. 
B) firms would have to raise their prices. 
C) inventories would be disappearing. 
D) aggregate quantity demanded would exceed aggregate quantity supplied. 
A) there would be excess goods on the market. 
B) firms would have to raise their prices. 
C) inventories would be disappearing. 
D) aggregate quantity demanded would exceed aggregate quantity supplied.

Question 4

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 5

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

Accepted Answer

A) inflation whenever supply increases. 
B) production below potential GDP. 
C) production above potential GDP. 
D) rapid price increases when demand changes. 
A) inflation whenever supply increases. 
B) production below potential GDP. 
C) production above potential GDP. 
D) rapid price increases when demand changes.

Question 6

A vertical aggregate supply curve increases the size of the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 7

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 8

As long as the multiplier process is working, firms will meet additional demand without raising prices.

Accepted Answer

A) True 
 B)False

Question 9

In the period from 1996 to 2000, the U.S.economy experienced the unusual combination of

Accepted Answer

A) high unemployment and high inflation. 
B) high unemployment and low inflation. 
C) low unemployment and high inflation. 
D) low unemployment and low inflation. 
A) high unemployment and high inflation. 
B) high unemployment and low inflation. 
C) low unemployment and high inflation. 
D) low unemployment and low inflation.

Question 10

If the MPC of an economy is 0.90 and the economy has a horizontal aggregate supply curve, then an increase in investment spending of $50 million will increase total income by

Accepted Answer

A) $50 million. 
B) more than $50 million but less than $500 million. 
C) $500 million. 
D) more than $500 million. 
A) $50 million. 
B) more than $50 million but less than $500 million. 
C) $500 million. 
D) more than $500 million.

Question 11

The self-correcting mechanism would be expected to be very rapid in an economy with

Accepted Answer

A) a large multiplier. 
B) flexible prices. 
C) rigid wages. 
D) high labor productivity. 
A) a large multiplier. 
B) flexible prices. 
C) rigid wages. 
D) high labor productivity.

Question 12

How are aggregate supply and stagflation related?

Accepted Answer

A) Stagflation usually causes an adverse shift in aggregate supply. 
B) An adverse supply shift usually causes stagflation. 
C) Stagflation only follows inflation, with no relation to aggregate supply. 
D) There is no relationship between the two. 
A) Stagflation usually causes an adverse shift in aggregate supply. 
B) An adverse supply shift usually causes stagflation. 
C) Stagflation only follows inflation, with no relation to aggregate supply. 
D) There is no relationship between the two.

Question 13

Figure 10-1
​  
-If the price level in Figure 10-1 were 100,

Accepted Answer

A) firms would have to lower their prices. 
B) inventories would be accumulating. 
C) shortages of goods would exist. 
D) aggregate quantity demanded would exceed aggregate quantity supplied. 
E) both c and d would occur. 
A) firms would have to lower their prices. 
B) inventories would be accumulating. 
C) shortages of goods would exist. 
D) aggregate quantity demanded would exceed aggregate quantity supplied. 
E) both c and d would occur.

Question 14

Figure 10-6
​  
-The typical result of an adverse supply shock is

Accepted Answer

A) falling output accompanied by accelerating inflation. 
B) falling output accompanied by decelerating inflation. 
C) rising output accompanied by accelerating inflation. 
D) rising output accompanied by decelerating inflation. 
A) falling output accompanied by accelerating inflation. 
B) falling output accompanied by decelerating inflation. 
C) rising output accompanied by accelerating inflation. 
D) rising output accompanied by decelerating inflation.

Question 15

When equilibrium GDP is greater than potential GDP, jobs are plentiful and labor is in great demand.

Accepted Answer

A) True 
 B)False

Question 16

A decrease in the availability of an important major resource such as oil shifts aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 17

A recessionary gap exists when aggregate demand is above the full employment level of output.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the money wage rate will cause the aggregate supply curve to shift

Accepted Answer

A) outward, which means the quantity supplied at any price level decreases. 
B) outward, which means the quantity supplied at any price level increases. 
C) inward, which means the quantity supplied at any price level increases. 
D) inward, which means the quantity supplied at any price level decreases. 
A) outward, which means the quantity supplied at any price level decreases. 
B) outward, which means the quantity supplied at any price level increases. 
C) inward, which means the quantity supplied at any price level increases. 
D) inward, which means the quantity supplied at any price level decreases.

Question 19

How is it possible for the economy to have an inflationary gap?

Accepted Answer

A) Equilibrium is at a GDP level below full employment. 
B) Equilibrium is at a GDP level equal to full employment. 
C) Equilibrium is at a GDP level above full employment. 
D) GDP is rising at full employment. 
E) GDP is falling at full employment. 
A) Equilibrium is at a GDP level below full employment. 
B) Equilibrium is at a GDP level equal to full employment. 
C) Equilibrium is at a GDP level above full employment. 
D) GDP is rising at full employment. 
E) GDP is falling at full employment.

Question 20

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.

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

The aggregate supply curve is shifted to the left ( inward) by

The slope of the aggregate supply curve is

Figure 10-1 ​ -If the price level in Figure 10-1 were 120,

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

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

A vertical aggregate supply curve increases the size of the multiplier effect.

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

As long as the multiplier process is working, firms will meet additional demand without raising prices.

In the period from 1996 to 2000, the U.S.economy experienced the unusual combination of

If the MPC of an economy is 0.90 and the economy has a horizontal aggregate supply curve, then an increase in investment spending of $50 million will increase total income by

The self-correcting mechanism would be expected to be very rapid in an economy with

How are aggregate supply and stagflation related?

Figure 10-1 ​ -If the price level in Figure 10-1 were 100,

Figure 10-6 ​ -The typical result of an adverse supply shock is

When equilibrium GDP is greater than potential GDP, jobs are plentiful and labor is in great demand.

A decrease in the availability of an important major resource such as oil shifts aggregate supply left.

A recessionary gap exists when aggregate demand is above the full employment level of output.

An increase in the money wage rate will cause the aggregate supply curve to shift

How is it possible for the economy to have an inflationary gap?

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

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 10-1 -If the price level in Figure 10-1 were 120,

Figure 10-1 -If the price level in Figure 10-1 were 100,

Figure 10-6 -The typical result of an adverse supply shock is