Question 1

In the mid-1970s, the price of oil rose dramatically. This

Accepted Answer

A)  shifted aggregate supply left. 
B)  caused the U.S. prices to fall. 
C)  shifted aggregate supply right. 
D)  All of these responses are correct.. 
A)  shifted aggregate supply left. 
B)  caused the U.S. prices to fall. 
C)  shifted aggregate supply right. 
D)  All of these responses are correct..

Question 2

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 3

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 4

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 5

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 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

The recessions of the 1970s are often attributed to an increase in oil prices.

Accepted Answer

A) True 
 B)False

Question 9

Figure 10-8
 
Figure 10-8 describes which of the following periods in the United States?

Accepted Answer

A)  1930s 
B)  1973-1975 
C)  late 1990s 
D)  2007-2009 
A)  1930s 
B)  1973-1975 
C)  late 1990s 
D)  2007-2009

Question 10

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 11

When OPEC cut energy production in 1973, the aggregate supply curve shifted outward.

Accepted Answer

A) True 
 B)False

Question 12

Stabilization policy may be necessary to slow down the speed of the adjustment process.

Accepted Answer

A) True 
 B)False

Question 13

Using aggregate demand and aggregate supply analysis, explain why increases in oil did not lead to stagflation in 2006-2008 but did lead to stagflation in the 1970s and early 1980s.

Accepted Answer

In the 1970s, the increases in oil price

Question 14

What does inflation do to the value of the oversimplified multiplier?

Accepted Answer

A)  Inflation increases the value of the multiplier above the value of the oversimplified formula. 
B)  Inflation does not change the value of the multiplier. 
C)  Inflation decreases the value of the multiplier below the value of the oversimplified formula. 
D)  Inflation increases the value of the multiplier unless the level of unemployment also rises. 
A)  Inflation increases the value of the multiplier above the value of the oversimplified formula. 
B)  Inflation does not change the value of the multiplier. 
C)  Inflation decreases the value of the multiplier below the value of the oversimplified formula. 
D)  Inflation increases the value of the multiplier unless the level of unemployment also rises.

Question 15

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 16

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.

Question 17

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 18

Over time, aggregate demand and aggregate supply grow by the same amount.

Accepted Answer

A) True 
 B)False

Question 19

Figure 10-4
 
In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Accepted Answer

A)  increase in autonomous consumer spending that shifts the aggregate demand curve to the left. 
B)  increase in wages that will shift the aggregate supply curve to the left. 
C)  decrease in investment spending that shifts the aggregate demand curve to the left. 
D)  decrease in wages that will shift the aggregate supply curve to the left. 
A)  increase in autonomous consumer spending that shifts the aggregate demand curve to the left. 
B)  increase in wages that will shift the aggregate supply curve to the left. 
C)  decrease in investment spending that shifts the aggregate demand curve to the left. 
D)  decrease in wages that will shift the aggregate supply curve to the left.

Question 20

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

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

In the mid-1970s, the price of oil rose dramatically. This

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

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

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

A recessionary gap exists when

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

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

The recessions of the 1970s are often attributed to an increase in oil prices.

Figure 10-8 Figure 10-8 describes which of the following periods in the United States?

Which of the following is evidence of an inflationary gap?

When OPEC cut energy production in 1973, the aggregate supply curve shifted outward.

Stabilization policy may be necessary to slow down the speed of the adjustment process.

Using aggregate demand and aggregate supply analysis, explain why increases in oil did not lead to stagflation in 2006-2008 but did lead to stagflation in the 1970s and early 1980s.

What does inflation do to the value of the oversimplified multiplier?

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

The major cost of production in the economy is

Aggregate supply is defined as

Over time, aggregate demand and aggregate supply grow by the same amount.

Figure 10-4 In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

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

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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