Question 1

The typical movement of the aggregate supply curve resulting from an increase in productivity is 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 2

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 3

From 2005 to 2006 the U.S.economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

Accepted Answer

A) True 
 B)False

Question 4

The concept of aggregate supply refers to a

Accepted Answer

A) fixed number of output. 
B) list of products demanded. 
C) schedule of output. 
D) schedule of production costs. 
A) fixed number of output. 
B) list of products demanded. 
C) schedule of output. 
D) schedule of production costs.

Question 5

If short-run equilibrium GDP is above potential GDP, prices will eventually rise.

Accepted Answer

A) True 
 B)False

Question 6

The aggregate supply curve is a fixed point representing potential GDP.

Accepted Answer

A) True 
 B)False

Question 7

Figure 10-8
  
-Figure 10-8 illustrates a period of

Accepted Answer

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

Question 8

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 9

Figure 10-6
  
-In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Accepted Answer

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

Question 10

One of the justifications of government stabilization policy is that it may

Accepted Answer

A) increase the fluctuations in inflation and employment. 
B) increase the multiplier effect of changes in autonomous spending. 
C) increase the volatility of economic variables. 
D) reduce the severity of inflation and unemployment. 
A) increase the fluctuations in inflation and employment. 
B) increase the multiplier effect of changes in autonomous spending. 
C) increase the volatility of economic variables. 
D) reduce the severity of inflation and unemployment.

Question 11

If the prices of inputs changes, what will happen to the aggregate supply curve?

Accepted Answer

A) It does not move but the economy moves along the curve. 
B) It depends on whether the input prices rise or fall. 
C) The curve will become flatter or steeper depending on whether the input prices rise or fall. 
D) It shifts inward or outward depending on whether the input prices rise or fall. 
A) It does not move but the economy moves along the curve. 
B) It depends on whether the input prices rise or fall. 
C) The curve will become flatter or steeper depending on whether the input prices rise or fall. 
D) It shifts inward or outward depending on whether the input prices rise or fall.

Question 12

An inflationary gap exists when consumers

Accepted Answer

A) are saving more than businesses are investing. 
B) and businesses are purchasing less than the economy is capable of producing. 
C) and businesses are demanding more than the economy is capable of producing. 
D) and businesses are demanding less than the full employment level of output. 
A) are saving more than businesses are investing. 
B) and businesses are purchasing less than the economy is capable of producing. 
C) and businesses are demanding more than the economy is capable of producing. 
D) and businesses are demanding less than the full employment level of output.

Question 13

The example of an inflationary gap in 2006-2007 suggested that the economy adjusts

Accepted Answer

A) rapidly to inflationary gaps by lowering prices. 
B) rapidly to inflationary gaps by raising prices. 
C) slowly to inflationary gaps by lowering prices. 
D) slowly to inflationary gaps by increasing inflation. 
A) rapidly to inflationary gaps by lowering prices. 
B) rapidly to inflationary gaps by raising prices. 
C) slowly to inflationary gaps by lowering prices. 
D) slowly to inflationary gaps by increasing inflation.

Question 14

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 15

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

Accepted Answer

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

Question 16

What is the principal reason that economists give for the existence of deflationary and inflationary gaps?

Accepted Answer

A) Wages are flexible in the short run. 
B) Wages are flexible in the long run. 
C) Wages are fixed in the long run. 
D) Wages are fixed in the short run. 
A) Wages are flexible in the short run. 
B) Wages are flexible in the long run. 
C) Wages are fixed in the long run. 
D) Wages are fixed in the short run.

Question 17

Increases in the prices of imported energy in 2002-2008 caused the aggregate supply curve to shift inward.

Accepted Answer

A) True 
 B)False

Question 18

How are aggregate supply and stagflation related?

Accepted Answer

A) Stagflation usually causes an adverse shift in aggregate supply. 
B) An adverse supply shift usually causes stagflation. 
C) Stagflation only follows inflation, with no relation to aggregate supply. 
D) There is no relationship between the two. 
A) Stagflation usually causes an adverse shift in aggregate supply. 
B) An adverse supply shift usually causes stagflation. 
C) Stagflation only follows inflation, with no relation to aggregate supply. 
D) There is no relationship between the two.

Question 19

A common error of business managers is to blame inflation on

Accepted Answer

A) consumer spending. 
B) rising wages. 
C) rising prices. 
D) rising interest rates. 
E) rising unemployment. 
A) consumer spending. 
B) rising wages. 
C) rising prices. 
D) rising interest rates. 
E) rising unemployment.

Question 20

Which of the following situations would cause a period of stagflation at a later point in time?

Accepted Answer

A) a recessionary gap 
B) a reduction in investment spending 
C) an increase in technological development 
D) an inflationary gap 
A) a recessionary gap 
B) a reduction in investment spending 
C) an increase in technological development 
D) an inflationary gap

Exam 27: Bringing in the Supply Side: Unemployment and Inflation

The typical movement of the aggregate supply curve resulting from an increase in productivity is that it

The aggregate supply curve is drawn with

From 2005 to 2006 the U.S.economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

The concept of aggregate supply refers to a

If short-run equilibrium GDP is above potential GDP, prices will eventually rise.

The aggregate supply curve is a fixed point representing potential GDP.

Figure 10-8 -Figure 10-8 illustrates a period of

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

Figure 10-6 -In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

One of the justifications of government stabilization policy is that it may

If the prices of inputs changes, what will happen to the aggregate supply curve?

An inflationary gap exists when consumers

The example of an inflationary gap in 2006-2007 suggested that the economy adjusts

Self correcting mechanism reveals that

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

What is the principal reason that economists give for the existence of deflationary and inflationary gaps?

Increases in the prices of imported energy in 2002-2008 caused the aggregate supply curve to shift inward.

How are aggregate supply and stagflation related?

A common error of business managers is to blame inflation on

Which of the following situations would cause a period of stagflation at a later point in time?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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