Question 1

Input prices are fixed for a period of time and this causes firms to increase production as prices increase.

Accepted Answer

A) True 
 B)False

Question 2

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 3

The aggregate supply curve is

Accepted Answer

A)  generally flatter as the level of resource use rises. 
B)  never vertical, even at full employment. 
C)  relatively flat at low levels of output. 
D)  relatively steep at low levels of output. 
A)  generally flatter as the level of resource use rises. 
B)  never vertical, even at full employment. 
C)  relatively flat at low levels of output. 
D)  relatively steep at low levels of output.

Question 4

The combination of high unemployment and high inflation is termed

Accepted Answer

A)  reflation. 
B)  stagflation. 
C)  depression. 
D)  unflation. 
A)  reflation. 
B)  stagflation. 
C)  depression. 
D)  unflation.

Question 5

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 6

The aggregate supply curve is drawn with

Accepted Answer

A)  the price level on the vertical axis and nominal GDP on the horizontal. 
B)  nominal GDP on the vertical axis and real GDP on the horizontal. 
C)  the price level on the vertical axis and real GDP on the horizontal. 
D)  real GDP on the horizontal and the rate of inflation on the vertical. 
A)  the price level on the vertical axis and nominal GDP on the horizontal. 
B)  nominal GDP on the vertical axis and real GDP on the horizontal. 
C)  the price level on the vertical axis and real GDP on the horizontal. 
D)  real GDP on the horizontal and the rate of inflation on the vertical.

Question 7

The main reason that firms adjust their output when the price level changes is that

Accepted Answer

A)  uncertainty causes a drop in output. 
B)  taxes cause a supply-side reaction. 
C)  their profit margins change. 
D)  increased risks lead to a change in output. 
E)  All of the above are correct. 
A)  uncertainty causes a drop in output. 
B)  taxes cause a supply-side reaction. 
C)  their profit margins change. 
D)  increased risks lead to a change in output. 
E)  All of the above are correct.

Question 8

Self correcting mechanism reveals that

Accepted Answer

A)  real wages will increase if there is an increase in price. 
B)  nominal wages will fall if there is inflationary gap. 
C)  nominal wages will increase if there is recessionary gap. 
D)  in the long run economy will be in equilibrium at potential GDP. 
A)  real wages will increase if there is an increase in price. 
B)  nominal wages will fall if there is inflationary gap. 
C)  nominal wages will increase if there is recessionary gap. 
D)  in the long run economy will be in equilibrium at potential GDP.

Question 9

An equilibrium point beyond a potential GDP is termed as

Accepted Answer

A)  deflationary gap. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  acceleration gap 
A)  deflationary gap. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  acceleration gap

Question 10

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 11

An economic boom that creates an inflationary gap is usually followed later by

Accepted Answer

A)  falling prices. 
B)  a period of stagflation. 
C)  an increase of potential GDP. 
D)  an increase in aggregate supply. 
A)  falling prices. 
B)  a period of stagflation. 
C)  an increase of potential GDP. 
D)  an increase in aggregate supply.

Question 12

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

Accepted Answer

A) True 
 B)False

Question 13

When price level is considered,the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

Accepted Answer

As long as the aggregate supply curve sl

Question 14

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 15

Figure 10-5
  
-In Figure 10-5,which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

Accepted Answer

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

Question 16

If the MPC of an economy is .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 17

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

Accepted Answer

A)  demand curve to shift outward. 
B)  supply curve to shift outward. 
C)  supply curve to shift inward. 
D)  demand curve to become flatter. 
A)  demand curve to shift outward. 
B)  supply curve to shift outward. 
C)  supply curve to shift inward. 
D)  demand curve to become flatter.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing. 
D)  It will get steeper. 
E)  It will get flatter. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing. 
D)  It will get steeper. 
E)  It will get flatter.

Question 20

For a given growth rate in aggregate supply,slower growth in aggregate demand will lead to lower inflation.

Accepted Answer

A) True 
 B)False

Input prices are fixed for a period of time and this causes firms to increase production as prices increase.

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

The aggregate supply curve is

The combination of high unemployment and high inflation is termed

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

The aggregate supply curve is drawn with

The main reason that firms adjust their output when the price level changes is that

Self correcting mechanism reveals that

An equilibrium point beyond a potential GDP is termed as

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)

An economic boom that creates an inflationary gap is usually followed later by

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

When price level is considered,the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

When inflation occurs,consumers

Figure 10-5 -In Figure 10-5,which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

If the MPC of an economy is .90 and the economy has a horizontal aggregate supply curve,then an increase in investment spending of $50 million will increase total income by

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

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

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

For a given growth rate in aggregate supply,slower growth in aggregate demand will lead to lower inflation.

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

Filters

Exam 10: Bringing in the Supply Side: Unemployment and Inflation?

Input prices are fixed for a period of time and this causes firms to increase production as prices increase.

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

The aggregate supply curve is

The combination of high unemployment and high inflation is termed

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

The aggregate supply curve is drawn with

The main reason that firms adjust their output when the price level changes is that

Self correcting mechanism reveals that

An equilibrium point beyond a potential GDP is termed as

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)

An economic boom that creates an inflationary gap is usually followed later by

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

When price level is considered,the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

When inflation occurs,consumers

Figure 10-5 -In Figure 10-5,which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

If the MPC of an economy is .90 and the economy has a horizontal aggregate supply curve,then an increase in investment spending of $50 million will increase total income by

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

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

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

For a given growth rate in aggregate supply,slower growth in aggregate demand will lead to lower inflation.

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

Filters