Question 1

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

Accepted Answer

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

Question 2

-In Table 10-1, if full employment occurs at $3,400 billion, then

Accepted Answer

A) the economy experiences a recessionary gap of $75 billion. 
B) the economy experiences a recessionary gap of $150 billion. 
C) the economy experiences an inflationary gap of $75 billion. 
D) the economy experiences an inflationary gap of $150 billion. 
A) the economy experiences a recessionary gap of $75 billion. 
B) the economy experiences a recessionary gap of $150 billion. 
C) the economy experiences an inflationary gap of $75 billion. 
D) the economy experiences an inflationary gap of $150 billion.

Question 3

An increase in wages 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 4

What is the usual response of firm to an increase in the price of what they sell?

Accepted Answer

A) An increase in output. 
B) An increase in hiring factors of production. 
C) An increase in the profit level of the firm. 
D) An increase in employment at the firm. 
E) All of the above. 
A) An increase in output. 
B) An increase in hiring factors of production. 
C) An increase in the profit level of the firm. 
D) An increase in employment at the firm. 
E) All of the above.

Question 5

A price level lower than equilibrium will cause quantity supplied to exceed quantity demanded.

Accepted Answer

A) True 
 B)False

Question 6

The slope of the aggregate supply curve decreases as total output increases.

Accepted Answer

A) True 
 B)False

Question 7

From the mid-1980s until late 2007, many world economies became less volatile because of:

Accepted Answer

A) ​sound macroeconomic policies 
B) ​several structural change that made the economies more flexible 
C) ​good luck 
D) ​All of the above. 
E) ​a through c only 
A) ​sound macroeconomic policies 
B) ​several structural change that made the economies more flexible 
C) ​good luck 
D) ​All of the above. 
E) ​a through c only

Question 8

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 9

The diminished employment prospects for the graduates of 2002 is most likely due to the existence of a(n)

Accepted Answer

A) inflationary gap. 
B) significant increase in real GDP. 
C) shift of the aggregate demand curve outward. 
D) recessionary gap. 
A) inflationary gap. 
B) significant increase in real GDP. 
C) shift of the aggregate demand curve outward. 
D) recessionary gap.

Question 10

In spite of the fact that unemployment rates were at a 30-year low in 1996-2000, the United States economy also experienced

Accepted Answer

A) declining inflation. 
B) balance of payments surpluses. 
C) large budget deficits. 
D) low growth. 
A) declining inflation. 
B) balance of payments surpluses. 
C) large budget deficits. 
D) low growth.

Question 11

Over time, aggregate demand and aggregate supply grow by the same amount.

Accepted Answer

A) True 
 B)False

Question 12

Economists believed that the U.S.economy had a (n) ____ in 2006 and 2007.

Accepted Answer

A) mild recession 
B) small recessionary gap 
C) small inflationary gap 
D) deflationary gap 
A) mild recession 
B) small recessionary gap 
C) small inflationary gap 
D) deflationary gap

Question 13

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

Accepted Answer

A) vertical. 
B) horizontal. 
C) downward sloping. 
D) upward sloping. 
A) vertical. 
B) horizontal. 
C) downward sloping. 
D) upward sloping.

Question 14

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 15

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 the above. 
A) improvement in the quality of life. 
B) reflation. 
C) real GDP growth. 
D) stagflation. 
E) All of the above.

Question 16

The OPEC production cuts of 1999-2000 increased energy prices and caused 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 17

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 18

What would be the likely result of a recessionary gap?
 If this leads to a fall in the nominal wage what impact it would have on the aggregate supply curve and on recessionary gap?

Accepted Answer

With equilibrium GDP below potential GDP

Question 19

What is meant by an economy's self correcting mechanism?
 Explain the process through which self correcting mechanism reduces inflationary gap.

Accepted Answer

The economy's self correcting mechanism

Question 20

A severe hurricane hits Florida, destroying large amounts of the citrus crop.What is the most likely effect of this on aggregate supply?

Accepted Answer

A) It will be unchanged. 
B) No effect, the economy will move along the curve to a higher price level. 
C) No effect, the economy will move along the curve to a lower price level. 
D) It will increase. 
E) It will decrease. 
A) It will be unchanged. 
B) No effect, the economy will move along the curve to a higher price level. 
C) No effect, the economy will move along the curve to a lower price level. 
D) It will increase. 
E) It will decrease.

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

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

-In Table 10-1, if full employment occurs at $3,400 billion, then

An increase in wages will cause the aggregate supply curve to

What is the usual response of firm to an increase in the price of what they sell?

A price level lower than equilibrium will cause quantity supplied to exceed quantity demanded.

The slope of the aggregate supply curve decreases as total output increases.

From the mid-1980s until late 2007, many world economies became less volatile because of:

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

The diminished employment prospects for the graduates of 2002 is most likely due to the existence of a(n)

In spite of the fact that unemployment rates were at a 30-year low in 1996-2000, the United States economy also experienced

Over time, aggregate demand and aggregate supply grow by the same amount.

Economists believed that the U.S.economy had a (n) ____ in 2006 and 2007.

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

Recessionary gap arises when

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

The OPEC production cuts of 1999-2000 increased energy prices and caused the aggregate supply curve to

One complication that tends to prolong recessionary gaps is that wages

What would be the likely result of a recessionary gap? If this leads to a fall in the nominal wage what impact it would have on the aggregate supply curve and on recessionary gap?

What is meant by an economy's self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gap.

A severe hurricane hits Florida, destroying large amounts of the citrus crop.What is the most likely effect of this on aggregate supply?

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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