Question 1

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

Accepted Answer

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

Question 2

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 3

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 4

In the period from 1996-2000,the United States economy experienced the unusual combination of

Accepted Answer

A)  high unemployment and high inflation. 
B)  high unemployment and low inflation. 
C)  low unemployment and high inflation. 
D)  low unemployment and low inflation. 
A)  high unemployment and high inflation. 
B)  high unemployment and low inflation. 
C)  low unemployment and high inflation. 
D)  low unemployment and low inflation.

Question 5

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Accepted Answer

A) True 
 B)False

Question 6

Figure 10-1
  
-In Figure 10-1,what is the equilibrium level of real GDP and equilibrium price?

Accepted Answer

A)  $6,000 billion real GDP and price level of 110 
B)  $5,000 billion real GDP and price level of 120 
C)  $5,000 billion real GDP and price level of 110 
D)  $7,500 billion real GDP and price level of 100 
A)  $6,000 billion real GDP and price level of 110 
B)  $5,000 billion real GDP and price level of 120 
C)  $5,000 billion real GDP and price level of 110 
D)  $7,500 billion real GDP and price level of 100

Question 7

An increase in the money wage rate will cause the aggregate supply curve to shift

Accepted Answer

A)  outward, which means the quantity supplied at any price level decreases. 
B)  outward, which means the quantity supplied at any price level increases. 
C)  inward, which means the quantity supplied at any price level increases. 
D)  inward, which means the quantity supplied at any price level decreases. 
A)  outward, which means the quantity supplied at any price level decreases. 
B)  outward, which means the quantity supplied at any price level increases. 
C)  inward, which means the quantity supplied at any price level increases. 
D)  inward, which means the quantity supplied at any price level decreases.

Question 8

The case for government stabilization policy is made more compelling if the

Accepted Answer

A)  self-correcting mechanism works very slowly. 
B)  self-correcting mechanism works too fast. 
C)  value of the multiplier is very small. 
D)  aggregate supply curve is very flat. 
A)  self-correcting mechanism works very slowly. 
B)  self-correcting mechanism works too fast. 
C)  value of the multiplier is very small. 
D)  aggregate supply curve is very flat.

Question 9

If scientific research produces a technological breakthrough in the production of computer memory,then

Accepted Answer

A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase, allowing businesses to cut back production. 
A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase, allowing businesses to cut back production.

Question 10

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

Accepted Answer

A)  It became steeper. 
B)  It became flatter. 
C)  It shifted inward. 
D)  It shifted outward. 
A)  It became steeper. 
B)  It became flatter. 
C)  It shifted inward. 
D)  It shifted outward.

Question 11

The aggregate supply curve will shift to the left if

Accepted Answer

A)  energy prices fall. 
B)  technology and productivity increase in the economy. 
C)  the capital stock of the economy increases. 
D)  the money wage rate increases. 
A)  energy prices fall. 
B)  technology and productivity increase in the economy. 
C)  the capital stock of the economy increases. 
D)  the money wage rate increases.

Question 12

Economists generally assume that there is a short-run trade-off between

Accepted Answer

A)  output and employment. 
B)  inflation and employment. 
C)  deflation and unemployment. 
D)  inflation and unemployment. 
E)  output and growth. 
A)  output and employment. 
B)  inflation and employment. 
C)  deflation and unemployment. 
D)  inflation and unemployment. 
E)  output and growth.

Question 13

Assume an economy with an upward-sloping aggregate supply curve and an MPC of .80.An increase in investment spending of $50 billion will most likely increase total income by

Accepted Answer

A)  $200 billion. 
B)  $40 billion. 
C)  more than $200 billion. 
D)  more than $50 billion but less than $250 billion. 
A)  $200 billion. 
B)  $40 billion. 
C)  more than $200 billion. 
D)  more than $50 billion but less than $250 billion.

Question 14

One complication in the process of reducing inflation by creating recessions is that the price level

Accepted Answer

A)  adjusts more quickly to recessionary gaps than to inflationary gaps. 
B)  does not apply as it does in inflationary gaps. 
C)  always rises. 
D)  rarely falls. 
A)  adjusts more quickly to recessionary gaps than to inflationary gaps. 
B)  does not apply as it does in inflationary gaps. 
C)  always rises. 
D)  rarely falls.

Question 15

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.

Question 16

The years 2002 through 2007 can be described as a period of

Accepted Answer

A)  falling output accompanied by increasing inflation. 
B)  falling output accompanied by decreasing inflation. 
C)  rising output accompanied by increasing inflation. 
D)  rising output accompanied by decreasing inflation. 
A)  falling output accompanied by increasing inflation. 
B)  falling output accompanied by decreasing inflation. 
C)  rising output accompanied by increasing inflation. 
D)  rising output accompanied by decreasing inflation.

Question 17

If the price level decreases,what will happen to the level of real GDP supplied?

Accepted Answer

A)  It will usually decrease. 
B)  It will usually increase. 
C)  Nothing. 
D)  It will decrease at first and then increase. 
A)  It will usually decrease. 
B)  It will usually increase. 
C)  Nothing. 
D)  It will decrease at first and then increase.

Question 18

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 19

Labor contracts often fix wages for more than one year.

Accepted Answer

A) True 
 B)False

Question 20

When the expenditure schedule is too high,the result is a(n)

Accepted Answer

A)  unemployment surplus. 
B)  inflationary gap. 
C)  recessionary gap. 
D)  budgetary gap. 
A)  unemployment surplus. 
B)  inflationary gap. 
C)  recessionary gap. 
D)  budgetary gap.

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

Recessionary gap arises when

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

In the period from 1996-2000,the United States economy experienced the unusual combination of

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Figure 10-1 -In Figure 10-1,what is the equilibrium level of real GDP and equilibrium price?

An increase in the money wage rate will cause the aggregate supply curve to shift

The case for government stabilization policy is made more compelling if the

If scientific research produces a technological breakthrough in the production of computer memory,then

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

The aggregate supply curve will shift to the left if

Economists generally assume that there is a short-run trade-off between

Assume an economy with an upward-sloping aggregate supply curve and an MPC of .80.An increase in investment spending of $50 billion will most likely increase total income by

One complication in the process of reducing inflation by creating recessions is that the price level

One complication that tends to prolong recessionary gaps is that wages

The years 2002 through 2007 can be described as a period of

If the price level decreases,what will happen to the level of real GDP supplied?

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

Labor contracts often fix wages for more than one year.

When the expenditure schedule is too high,the result is a(n)

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

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

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

Recessionary gap arises when

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

In the period from 1996-2000,the United States economy experienced the unusual combination of

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Figure 10-1 -In Figure 10-1,what is the equilibrium level of real GDP and equilibrium price?

An increase in the money wage rate will cause the aggregate supply curve to shift

The case for government stabilization policy is made more compelling if the

If scientific research produces a technological breakthrough in the production of computer memory,then

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

The aggregate supply curve will shift to the left if

Economists generally assume that there is a short-run trade-off between

Assume an economy with an upward-sloping aggregate supply curve and an MPC of .80.An increase in investment spending of $50 billion will most likely increase total income by

One complication in the process of reducing inflation by creating recessions is that the price level

One complication that tends to prolong recessionary gaps is that wages

The years 2002 through 2007 can be described as a period of

If the price level decreases,what will happen to the level of real GDP supplied?

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

Labor contracts often fix wages for more than one year.

When the expenditure schedule is too high,the result is a(n)

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