Question 1

A period of stagflation is the normal aftermath of a period of

Accepted Answer

A) excess aggregate supply. 
B) deficient aggregate demand. 
C) excess aggregate demand. 
D) high unemployment rates. 
A) excess aggregate supply. 
B) deficient aggregate demand. 
C) excess aggregate demand. 
D) high unemployment rates.

Question 2

As a result of the war in Afghanistan, the population of Afghanistan as well as their capital stock was reduced.This can be illustrated by the aggregate supply curve

Accepted Answer

A) shifting outward. 
B) becoming flatter. 
C) shifting inward. 
D) becoming more elastic. 
A) shifting outward. 
B) becoming flatter. 
C) shifting inward. 
D) becoming more elastic.

Question 3

A outward shift of the aggregate supply curve could be caused by

Accepted Answer

A) higher import prices. 
B) lower import prices. 
C) energy shortages. 
D) rising wage rates. 
A) higher import prices. 
B) lower import prices. 
C) energy shortages. 
D) rising wage rates.

Question 4

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 5

Stagflation exists when prices rise and output falls.

Accepted Answer

A) True 
 B)False

Question 6

Figure 10-2
​  
-One reason the oversimplified multiplier is incorrect is that inflation

Accepted Answer

A) increases the multiplier by increasing investment spending. 
B) increases the multiplier by increasing consumer spending. 
C) decreases the multiplier by increasing net exports. 
D) decreases the multiplier by decreasing consumer spending. 
A) increases the multiplier by increasing investment spending. 
B) increases the multiplier by increasing consumer spending. 
C) decreases the multiplier by increasing net exports. 
D) decreases the multiplier by decreasing consumer spending.

Question 7

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

Accepted Answer

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

Question 8

When inflation occurs, consumers

Accepted Answer

A) realize gains in their wealth. 
B) increase spending to catch up with higher prices. 
C) automatically shift the consumption line upward. 
D) suffer a decrease in real wealth. 
A) realize gains in their wealth. 
B) increase spending to catch up with higher prices. 
C) automatically shift the consumption line upward. 
D) suffer a decrease in real wealth.

Question 9

Describe the main explanations for the downward rigidity of wages in the modern macroeconomy.Evaluate their probability of being correct and important.

Accepted Answer

One reason is the existence of instituti

Question 10

Figure 10-5  
-In Figure 10-5, which graph best illustrates the situation of an economy reacting to an inflationary gap through an increase in wage levels?

Accepted Answer

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

Question 11

The slope of the aggregate supply curve increases as output increases because

Accepted Answer

A) the cost of resource use increases as potential is reached. 
B) consumers are willing to pay more as output expands. 
C) firms substitute capital for labor as prices increase. 
D) firms substitute capital for labor as capacity is reached. 
A) the cost of resource use increases as potential is reached. 
B) consumers are willing to pay more as output expands. 
C) firms substitute capital for labor as prices increase. 
D) firms substitute capital for labor as capacity is reached.

Question 12

The existence of an inflationary gap would tend to benefit most

Accepted Answer

A) bankers. 
B) retired persons. 
C) unemployed workers. 
D) stock owners. 
A) bankers. 
B) retired persons. 
C) unemployed workers. 
D) stock owners.

Question 13

Figure 10-5  
-In Figure 10-5, which graph best illustrates the situation of an economy near full employment that experiences an increase in autonomous consumer spending?

Accepted Answer

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

Question 14

An inflationary gap exists when consumers

Accepted Answer

A) are saving more than businesses are investing. 
B) and businesses are purchasing less than the economy is capable of producing. 
C) and businesses are demanding more than the economy is capable of producing. 
D) and businesses are demanding less than the full employment level of output. 
A) are saving more than businesses are investing. 
B) and businesses are purchasing less than the economy is capable of producing. 
C) and businesses are demanding more than the economy is capable of producing. 
D) and businesses are demanding less than the full employment level of output.

Question 15

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

Accepted Answer

A) stagflation 
B) reflation 
C) disinflation 
D) perflation 
A) stagflation 
B) reflation 
C) disinflation 
D) perflation

Question 16

The primary effect of OPEC actions in the period from 1973 to 1980 was to increase

Accepted Answer

A) wage rates. 
B) interest rates. 
C) employment and output. 
D) energy prices. 
A) wage rates. 
B) interest rates. 
C) employment and output. 
D) energy prices.

Question 17

When an inflationary gap exists, the job prospects of new college graduates are

Accepted Answer

A) very dim. 
B) somewhat encouraging. 
C) worse in comparison to a recessionary gap. 
D) excellent. 
A) very dim. 
B) somewhat encouraging. 
C) worse in comparison to a recessionary gap. 
D) excellent.

Question 18

If the economy experiences inflation and economic growth, this means that aggregate demand grows by more than aggregate supply.

Accepted Answer

A) True 
 B)False

Question 19

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A) short-run fluctuations in the economy. 
B) the effects of macroeconomic policy on the prices of individual goods. 
C) productivity and economic growth. 
D) None of the above is correct. 
A) short-run fluctuations in the economy. 
B) the effects of macroeconomic policy on the prices of individual goods. 
C) productivity and economic growth. 
D) None of the above is correct.

Question 20

If aggregate quantity supplied exceeds aggregate quantity demanded, we can expect an unplanned

Accepted Answer

A) depletion of inventories, causing firms to raise prices. 
B) depletion of inventories, causing firms to lower prices. 
C) accumulation of inventories, causing firms to raise prices. 
D) accumulation of inventories, causing firms to lower prices. 
A) depletion of inventories, causing firms to raise prices. 
B) depletion of inventories, causing firms to lower prices. 
C) accumulation of inventories, causing firms to raise prices. 
D) accumulation of inventories, causing firms to lower prices.

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

A period of stagflation is the normal aftermath of a period of

As a result of the war in Afghanistan, the population of Afghanistan as well as their capital stock was reduced.This can be illustrated by the aggregate supply curve

A outward shift of the aggregate supply curve could be caused by

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

Stagflation exists when prices rise and output falls.

Figure 10-2 ​ -One reason the oversimplified multiplier is incorrect is that inflation

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

When inflation occurs, consumers

Describe the main explanations for the downward rigidity of wages in the modern macroeconomy.Evaluate their probability of being correct and important.

Figure 10-5 -In Figure 10-5, which graph best illustrates the situation of an economy reacting to an inflationary gap through an increase in wage levels?

The slope of the aggregate supply curve increases as output increases because

The existence of an inflationary gap would tend to benefit most

Figure 10-5 -In Figure 10-5, which graph best illustrates the situation of an economy near full employment that experiences an increase in autonomous consumer spending?

An inflationary gap exists when consumers

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

The primary effect of OPEC actions in the period from 1973 to 1980 was to increase

When an inflationary gap exists, the job prospects of new college graduates are

If the economy experiences inflation and economic growth, this means that aggregate demand grows by more than aggregate supply.

Most economists use the aggregate demand and aggregate supply model primarily to analyze

If aggregate quantity supplied exceeds aggregate quantity demanded, we can expect an unplanned

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 10-2 -One reason the oversimplified multiplier is incorrect is that inflation

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