Question 1

Recessionary gaps usually lead to

Accepted Answer

A)  structural unemployment. 
B)  cyclical unemployment. 
C)  seasonal unemployment. 
D)  frictional unemployment. 
A)  structural unemployment. 
B)  cyclical unemployment. 
C)  seasonal unemployment. 
D)  frictional unemployment.

Question 2

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A period of stagflation can be considered as part of the normal aftermath of a

Accepted Answer

A)  decrease in aggregate demand. 
B)  period of high unemployment. 
C)  period of low unemployment. 
D)  period of inward shifting aggregate demand. 
A)  decrease in aggregate demand. 
B)  period of high unemployment. 
C)  period of low unemployment. 
D)  period of inward shifting aggregate demand.

Question 5

A decrease in the price of resources will cause the aggregate supply curve to

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  become flatter. 
D)  become steeper. 
A)  shift outward. 
B)  shift inward. 
C)  become flatter. 
D)  become steeper.

Question 6

For most firms in the economy, the largest part of factor costs is the cost of

Accepted Answer

A)  labor. 
B)  capital. 
C)  property and machinery. 
D)  land and natural resources. 
A)  labor. 
B)  capital. 
C)  property and machinery. 
D)  land and natural resources.

Question 7

The aggregate supply curve is the relationship between the price level and the quantity of real GDP purchased.

Accepted Answer

A) True 
 B)False

Question 8

The model of aggregate demand and aggregate supply explains the relation between

Accepted Answer

A)  price and quantity of a particular good. 
B)  unemployment and real output. 
C)  wages and unemployment rate. 
D)  real GDP and the price level. 
A)  price and quantity of a particular good. 
B)  unemployment and real output. 
C)  wages and unemployment rate. 
D)  real GDP and the price level.

Question 9

Part of the normal aftermath of a period of excessive aggregate demand is

Accepted Answer

A)  improvement in the quality of life. 
B)  reflation. 
C)  real GDP growth. 
D)  stagflation. 
E)  All of these responses are correct. 
A)  improvement in the quality of life. 
B)  reflation. 
C)  real GDP growth. 
D)  stagflation. 
E)  All of these responses are correct.

Question 10

Which of the following shifts the short-run supply curve to the right?

Accepted Answer

A)  An increase in the price level 
B)  An increase in the minimum wages 
C)  A decrease in the price of oil 
D)  All of these responses are correct. 
A)  An increase in the price level 
B)  An increase in the minimum wages 
C)  A decrease in the price of oil 
D)  All of these responses are correct.

Question 11

Aggregate supply can be thought of as

Accepted Answer

A)  a fixed amount of output. 
B)  unrelated to the price level. 
C)  a schedule of output at different price levels. 
D)  the volume of goods at the ends of the production possibilities curve. 
A)  a fixed amount of output. 
B)  unrelated to the price level. 
C)  a schedule of output at different price levels. 
D)  the volume of goods at the ends of the production possibilities curve.

Question 12

When equilibrium GDP is below potential GDP, jobs are

Accepted Answer

A)  plentiful and unemployment is low. 
B)  plentiful and unemployment is high. 
C)  scarce and unemployment is high. 
D)  scarce and unemployment is low. 
A)  plentiful and unemployment is low. 
B)  plentiful and unemployment is high. 
C)  scarce and unemployment is high. 
D)  scarce and unemployment is low.

Question 13

Figure 10-7
 
Which of the diagrams in Figure 10-7 shows an economic recession caused primarily by a change aggregate demand?

Accepted Answer

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

Question 14

A change in the aggregate price level moves the economy along a given aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 15

Increases in the availability of natural resources will affect the aggregate supply curve such that it

Accepted Answer

A)  shifts inward and becomes flatter. 
B)  shifts inward. 
C)  shifts outward. 
D)  becomes flatter. 
E)  becomes steeper. 
A)  shifts inward and becomes flatter. 
B)  shifts inward. 
C)  shifts outward. 
D)  becomes flatter. 
E)  becomes steeper.

Question 16

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 17

Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?

Accepted Answer

When aggregate demand is excessive, the

Question 18

Increases in productivity are caused by

Accepted Answer

A)  better education and training of the labor force. 
B)  higher levels of literacy. 
C)  improvements in technology. 
D)  All of these responses are correct. 
A)  better education and training of the labor force. 
B)  higher levels of literacy. 
C)  improvements in technology. 
D)  All of these responses are correct.

Question 19

Recessionary gap arises when

Accepted Answer

A)  inventory stock falls. 
B)  government spending increases. 
C)  when the general price level increases. 
D)  there is less spending than desired. 
A)  inventory stock falls. 
B)  government spending increases. 
C)  when the general price level increases. 
D)  there is less spending than desired.

Question 20

One complication that tends to prolong recessionary gaps is that wages

Accepted Answer

A)  are fixed by unions, which represent nearly all workers in the United States. 
B)  tend to rise rapidly. 
C)  rarely fall. 
D)  tend to move in the opposite direction from prices. 
A)  are fixed by unions, which represent nearly all workers in the United States. 
B)  tend to rise rapidly. 
C)  rarely fall. 
D)  tend to move in the opposite direction from prices.

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

Recessionary gaps usually lead to

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

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

A period of stagflation can be considered as part of the normal aftermath of a

A decrease in the price of resources will cause the aggregate supply curve to

For most firms in the economy, the largest part of factor costs is the cost of

The aggregate supply curve is the relationship between the price level and the quantity of real GDP purchased.

The model of aggregate demand and aggregate supply explains the relation between

Part of the normal aftermath of a period of excessive aggregate demand is

Which of the following shifts the short-run supply curve to the right?

Aggregate supply can be thought of as

When equilibrium GDP is below potential GDP, jobs are

Figure 10-7 Which of the diagrams in Figure 10-7 shows an economic recession caused primarily by a change aggregate demand?

A change in the aggregate price level moves the economy along a given aggregate supply curve.

Increases in the availability of natural resources will affect the aggregate supply curve such that it

The existence of an inflationary gap would tend to benefit most

Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?

Increases in productivity are caused by

Recessionary gap arises when

One complication that tends to prolong recessionary gaps is that wages

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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