Question 1

Exhibit 10.4
  
-Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. Which of these statements is true if the economy is at point M on SRAS₁₀₀?

Accepted Answer

A)  The actual price level is lower than expected, with a $200 billion expansionary gap. 
B)  The actual price level is lower than expected, with a $200 billion recessionary gap. 
C)  The actual price level is higher than expected, with a $200 billion recessionary gap. 
D)  The actual price level is higher than expected, with a $200 billion expansionary gap. 
E)  The economy is in equilibrium in the short run and the long run. 
A)  The actual price level is lower than expected, with a $200 billion expansionary gap. 
B)  The actual price level is lower than expected, with a $200 billion recessionary gap. 
C)  The actual price level is higher than expected, with a $200 billion recessionary gap. 
D)  The actual price level is higher than expected, with a $200 billion expansionary gap. 
E)  The economy is in equilibrium in the short run and the long run.

Question 2

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. Which of the following is likely to be true if the actual price level in this exhibit exceeds the expected price level?

Accepted Answer

A)  The equilibrium output will be Y₂ in the short run. 
B)  The equilibrium output will be Y₁ in the short run. 
C)  The actual unemployment rate is below the natural rate. 
D)  Potential output is greater than actual output. 
E)  The actual price level is less than the equilibrium price level. 
A)  The equilibrium output will be Y₂ in the short run. 
B)  The equilibrium output will be Y₁ in the short run. 
C)  The actual unemployment rate is below the natural rate. 
D)  Potential output is greater than actual output. 
E)  The actual price level is less than the equilibrium price level.

Question 3

Which of these is not a beneficial supply shock?

Accepted Answer

A)  an abundant harvest that increases food supply 
B)  the discovery of natural resources 
C)  reductions in business taxes 
D)  technological advances 
E)  establishment of the Occupational Safety and Health Administration (OSH
A)  
A)  an abundant harvest that increases food supply 
B)  the discovery of natural resources 
C)  reductions in business taxes 
D)  technological advances 
E)  establishment of the Occupational Safety and Health Administration (OSH
A)

Question 4

If costs increase, what happens to the aggregate supply curve?

Accepted Answer

A)  It shifts rightward. 
B)  It shifts leftward. 
C)  Prices move up along the curve. 
D)  Prices move down along the curve. 
E)  There is no change. 
A)  It shifts rightward. 
B)  It shifts leftward. 
C)  Prices move up along the curve. 
D)  Prices move down along the curve. 
E)  There is no change.

Question 5

When resource prices are negotiable, the long-run aggregate supply curve is represented by _____

Accepted Answer

A)  an upward-sloping line. 
B)  a downward-sloping line. 
C)  a vertical line at potential output. 
D)  a horizontal line at the actual price level. 
E)  a horizontal line at the expected price level. 
A)  an upward-sloping line. 
B)  a downward-sloping line. 
C)  a vertical line at potential output. 
D)  a horizontal line at the actual price level. 
E)  a horizontal line at the expected price level.

Question 6

Stagflation is defined as _____

Accepted Answer

A)  decreased output accompanied by a higher price level. 
B)  decreased output accompanied by a lower price level. 
C)  increased output accompanied by a lower price level. 
D)  increased output accompanied by a higher price level. 
E)  stagnation in the rate of inflation. 
A)  decreased output accompanied by a higher price level. 
B)  decreased output accompanied by a lower price level. 
C)  increased output accompanied by a lower price level. 
D)  increased output accompanied by a higher price level. 
E)  stagnation in the rate of inflation.

Question 7

Exhibit 10.4
  
-Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. In this exhibit, which of the following is true for an economy that is at point V in the short run?

Accepted Answer

A)  There is a recessionary gap worth $200 billion. 
B)  The potential output is $7 trillion. 
C)  The actual price level is 100. 
D)  The natural rate of unemployment is more than 6.8 trillion. 
E)  The actual output is equal to the potential output. 
A)  There is a recessionary gap worth $200 billion. 
B)  The potential output is $7 trillion. 
C)  The actual price level is 100. 
D)  The natural rate of unemployment is more than 6.8 trillion. 
E)  The actual output is equal to the potential output.

Question 8

When an economy is not producing at its potential output, which of the following is likely?

Accepted Answer

A)  The actual price level is unexpected. 
B)  The nominal wage is equal to the real wage. 
C)  The unemployment rate is about 14 percent. 
D)  The economy is producing its maximum sustainable output. 
E)  The economy is producing its minimum sustainable output. 
A)  The actual price level is unexpected. 
B)  The nominal wage is equal to the real wage. 
C)  The unemployment rate is about 14 percent. 
D)  The economy is producing its maximum sustainable output. 
E)  The economy is producing its minimum sustainable output.

Question 9

In 2009, actual output in the United States was 4.6 percent below the potential output. This implies that _____

Accepted Answer

A)  unemployment in the United States was below its natural rate. 
B)  the poverty level in the United States was below average. 
C)  there was a recessionary gap in the economy. 
D)  there was an expansionary gap in the economy. 
E)  there was an excess demand in the economy. 
A)  unemployment in the United States was below its natural rate. 
B)  the poverty level in the United States was below average. 
C)  there was a recessionary gap in the economy. 
D)  there was an expansionary gap in the economy. 
E)  there was an excess demand in the economy.

Question 10

What does aggregate supply reflect?

Accepted Answer

A)  It reflects billions of production decisions made by millions of individual resource suppliers and firms in the economy. 
B)  It reflects billions of production decisions made by millions of individual households in the economy. 
C)  It shows the relation between the interest rate and the quantity of capital goods firms supply. 
D)  It shows the relation between investment and the quantity of capital goods firms supply. 
E)  It shows an inverse relationship between the price level and real GDP. 
A)  It reflects billions of production decisions made by millions of individual resource suppliers and firms in the economy. 
B)  It reflects billions of production decisions made by millions of individual households in the economy. 
C)  It shows the relation between the interest rate and the quantity of capital goods firms supply. 
D)  It shows the relation between investment and the quantity of capital goods firms supply. 
E)  It shows an inverse relationship between the price level and real GDP.

Question 11

How much of production costs does labor account for?

Accepted Answer

A)  30 percent 
B)  55 percent 
C)  65 percent 
D)  70 percent 
E)  75 percent 
A)  30 percent 
B)  55 percent 
C)  65 percent 
D)  70 percent 
E)  75 percent

Question 12

Table 10.2
  
-Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #1, the equilibrium output and price level for the economy are _____

Accepted Answer

A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively. 
A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively.

Question 13

Exhibit 10.7
  
-Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If prices are as expected at 160, then point W is _____

Accepted Answer

A)  a short-run and a long-run equilibrium. 
B)  a short-run equilibrium only. 
C)  a long-run equilibrium only. 
D)  neither a short-run nor a long-run equilibrium. 
E)  a medium-run equilibrium. 
A)  a short-run and a long-run equilibrium. 
B)  a short-run equilibrium only. 
C)  a long-run equilibrium only. 
D)  neither a short-run nor a long-run equilibrium. 
E)  a medium-run equilibrium.

Question 14

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

Accepted Answer

A)  a rise in energy prices 
B)  a drop in the actual price level 
C)  an increase in the demand for leisure hours 
D)  an increase in the level of investment spending that is less than the depreciation of the capital stock 
E)  a technological breakthrough with widespread practical applications 
A)  a rise in energy prices 
B)  a drop in the actual price level 
C)  an increase in the demand for leisure hours 
D)  an increase in the level of investment spending that is less than the depreciation of the capital stock 
E)  a technological breakthrough with widespread practical applications

Question 15

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true of a recessionary gap?

Accepted Answer

A)  It develops when the expected price level is less than the actual price level. 
B)  In the long run, this gap closes when resource suppliers negotiate lower resource payments. 
C)  It measures the amount by which actual output is greater than an economy's potential output. 
D)  In the long run, this gap closes when the short-run aggregate supply curve shifts leftward. 
E)  In the long run, this gap closes when the aggregate demand curve shifts rightward. 
A)  It develops when the expected price level is less than the actual price level. 
B)  In the long run, this gap closes when resource suppliers negotiate lower resource payments. 
C)  It measures the amount by which actual output is greater than an economy's potential output. 
D)  In the long run, this gap closes when the short-run aggregate supply curve shifts leftward. 
E)  In the long run, this gap closes when the aggregate demand curve shifts rightward.

Question 17

Does an expansionary gap or a recessionary gap exist if short-run output is $18.0 trillion and potential output is $18.2 trillion?

Accepted Answer

A)  an expansionary gap 
B)  a recessionary gap 
C)  both an expansionary gap and a recessionary gap 
D)  neither an expansionary gap nor a recessionary gap 
E)  The actual gap is equal to potential output. 
A)  an expansionary gap 
B)  a recessionary gap 
C)  both an expansionary gap and a recessionary gap 
D)  neither an expansionary gap nor a recessionary gap 
E)  The actual gap is equal to potential output.

Question 18

Which of the following is true?

Accepted Answer

A)  The nominal wage will be constant only if the inflation rate is constant. 
B)  The real wage will be greater than the nominal wage only if the inflation rate is constant. 
C)  The nominal wage and the real wage will change by the same amount if the price level is constant. 
D)  The real wage will be equal to one only if the price level is zero. 
E)  The real wage will be constant only if the nominal wage is constant. 
A)  The nominal wage will be constant only if the inflation rate is constant. 
B)  The real wage will be greater than the nominal wage only if the inflation rate is constant. 
C)  The nominal wage and the real wage will change by the same amount if the price level is constant. 
D)  The real wage will be equal to one only if the price level is zero. 
E)  The real wage will be constant only if the nominal wage is constant.

Question 19

Which of the following is true if marginal costs increase at a slow rate as output increases?

Accepted Answer

A)  The short-run aggregate supply curve is relatively steep. 
B)  The short-run aggregate supply curve becomes vertical. 
C)  The short-run aggregate supply curve is relatively flat. 
D)  The long-run aggregate supply curve becomes horizontal. 
E)  The long-run aggregate supply curve becomes downward sloping. 
A)  The short-run aggregate supply curve is relatively steep. 
B)  The short-run aggregate supply curve becomes vertical. 
C)  The short-run aggregate supply curve is relatively flat. 
D)  The long-run aggregate supply curve becomes horizontal. 
E)  The long-run aggregate supply curve becomes downward sloping.

Question 20

What is the correct definition of the short run?

Accepted Answer

A)  a period during which some resource prices, especially those for labor, remain fixed 
B)  a period during which some resource prices, especially those for labor, are variable 
C)  a period during which some resource prices, especially those for labor, are less than expected 
D)  a period during which some resource prices, especially those for labor, are more than expected 
E)  a period during which some resource prices, especially those for labor, can be renegotiated 
A)  a period during which some resource prices, especially those for labor, remain fixed 
B)  a period during which some resource prices, especially those for labor, are variable 
C)  a period during which some resource prices, especially those for labor, are less than expected 
D)  a period during which some resource prices, especially those for labor, are more than expected 
E)  a period during which some resource prices, especially those for labor, can be renegotiated

Exhibit 10.4 -Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. Which of these statements is true if the economy is at point M on SRAS₁₀₀?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. Which of the following is likely to be true if the actual price level in this exhibit exceeds the expected price level?

Which of these is not a beneficial supply shock?

If costs increase, what happens to the aggregate supply curve?

When resource prices are negotiable, the long-run aggregate supply curve is represented by _____

Stagflation is defined as _____

Exhibit 10.4 -Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. In this exhibit, which of the following is true for an economy that is at point V in the short run?

When an economy is not producing at its potential output, which of the following is likely?

In 2009, actual output in the United States was 4.6 percent below the potential output. This implies that _____

What does aggregate supply reflect?

How much of production costs does labor account for?

Table 10.2 -Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #1, the equilibrium output and price level for the economy are _____

Exhibit 10.7 -Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If prices are as expected at 160, then point W is _____

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

Which of the following is true of a recessionary gap?

Does an expansionary gap or a recessionary gap exist if short-run output is $18.0 trillion and potential output is $18.2 trillion?

Which of the following is true?

Which of the following is true if marginal costs increase at a slow rate as output increases?

What is the correct definition of the short run?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

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Exam 10: Aggregate Supply.

Exhibit 10.4 -Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. Which of these statements is true if the economy is at point M on SRAS₁₀₀?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. Which of the following is likely to be true if the actual price level in this exhibit exceeds the expected price level?

Which of these is not a beneficial supply shock?

If costs increase, what happens to the aggregate supply curve?

When resource prices are negotiable, the long-run aggregate supply curve is represented by _____

Stagflation is defined as _____

Exhibit 10.4 -Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. In this exhibit, which of the following is true for an economy that is at point V in the short run?

When an economy is not producing at its potential output, which of the following is likely?

In 2009, actual output in the United States was 4.6 percent below the potential output. This implies that _____

What does aggregate supply reflect?

How much of production costs does labor account for?

Table 10.2 -Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #1, the equilibrium output and price level for the economy are _____

Exhibit 10.7 -Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If prices are as expected at 160, then point W is _____

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

Which of the following is true of a recessionary gap?

Does an expansionary gap or a recessionary gap exist if short-run output is $18.0 trillion and potential output is $18.2 trillion?

Which of the following is true?

Which of the following is true if marginal costs increase at a slow rate as output increases?

What is the correct definition of the short run?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

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