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

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

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

The combination of high unemployment and high inflation is termed

What is meant by an economy's self-correcting mechanism? Explain the process through which self-correcting mechanism reduces inflationary gap.

Higher wages mean higher production costs and lower profits at any given selling price.

Stagflation is inflation that occurs while the economy is growing slowly or having a recession.

Which of the following events will lead to an inward shift of the aggregate supply curve?

From the mid-1980s until late 2007, many world economies became less volatile because of

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

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

As the multiplier process is working on the demand side,

The relationship between the price level and the quantity of real GDP supplied is

Stagflation may follow an inflationary boom.

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

The price of imported oil decreased in 2001. How did this affect the aggregate supply curve?

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

Economists believed that the U.S. economy had a (n) ____ in 2006 and 2007.

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

When inflation occurs, consumers

If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion, the price level will rise.