Question 1

The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience:

Accepted Answer

A)  Falling input costs, so they will increase their output level 
B)  No change in input costs, so they will not change their output level 
C)  Falling inputs costs, so they will reduce their output level 
D)  No change in input costs, so they will reduce their output level 
A)  Falling input costs, so they will increase their output level 
B)  No change in input costs, so they will not change their output level 
C)  Falling inputs costs, so they will reduce their output level 
D)  No change in input costs, so they will reduce their output level

Question 2

Refer to the graph above. If the government wishes to collect tax revenues equal to R2, supply-side economists would strongly advise the government to set tax rates at:

Accepted Answer

A)  T2 or T3 
B)  T2 only 
C)  T4 only 
D)  T2 or T4 
A)  T2 or T3 
B)  T2 only 
C)  T4 only 
D)  T2 or T4

Question 3

If the government adopts a "hands off" approach to cost-push inflation in the economy, then in the short run there is likely to be:

Accepted Answer

A)  A rise in real output 
B)  A fall in unemployment 
C)  An inflationary spiral 
D)  A recession 
A)  A rise in real output 
B)  A fall in unemployment 
C)  An inflationary spiral 
D)  A recession

Question 4

A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating:

Accepted Answer

A)  An easy money policy 
B)  A tight money policy 
C)  A supply-side fiscal policy 
D)  A contractionary fiscal policy 
A)  An easy money policy 
B)  A tight money policy 
C)  A supply-side fiscal policy 
D)  A contractionary fiscal policy

Question 5

According to the simple extended AD-AS model, aggregate demand is a major determinant of the level of output in the long run.

Accepted Answer

A) True 
 B)False

Question 6

Stagflation can be described as a:

Accepted Answer

A)  Shift right in the aggregate supply curve 
B)  Shift left in the aggregate supply curve 
C)  Period of stable prices and high unemployment 
D)  Period of rising prices and low unemployment 
A)  Shift right in the aggregate supply curve 
B)  Shift left in the aggregate supply curve 
C)  Period of stable prices and high unemployment 
D)  Period of rising prices and low unemployment

Question 7

The short-run Phillips Curve assumes an unchanging:

Accepted Answer

A)  Actual rate of inflation 
B)  Expected rate of inflation 
C)  Unemployment rate 
D)  Fiscal or monetary policy 
A)  Actual rate of inflation 
B)  Expected rate of inflation 
C)  Unemployment rate 
D)  Fiscal or monetary policy

Question 8

If the government adopts a "hands-off" policy toward inflation, then the long run effects of cost-push inflation and demand-pull inflation are identical.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the graph above. Suppose that the economy is at an initial equilibrium where the AD1 and AS1 curves intersect. Demand-pull inflation in the short run can best be represented as a shift of:

Accepted Answer

A)  AS1 to the right 
B)  AD1 to the right 
C)  AS1 to the left 
D)  AD1 to the left 
A)  AS1 to the right 
B)  AD1 to the right 
C)  AS1 to the left 
D)  AD1 to the left

Question 10

The Romer and Romer 2010 paper in the American Economic Review identified the major motivations for most significant legislated tax changes to be the following, except:

Accepted Answer

A)  Adjustments made to match changes in government spending 
B)  Offsetting the monetary policy pursued by the Federal Reserve 
C)  Addressing an inherited budget deficit 
D)  Promoting long-run economic growth 
A)  Adjustments made to match changes in government spending 
B)  Offsetting the monetary policy pursued by the Federal Reserve 
C)  Addressing an inherited budget deficit 
D)  Promoting long-run economic growth

Question 11

In the graphs below, QP refers to the economy's potential output level.   Refer to the graphs above. Graph A is constructed on the basic assumption that:

Accepted Answer

A)  The price level is not flexible 
B)  Nominal wages are unresponsive to price-level changes 
C)  Real output is unresponsive to price-level changes 
D)  Unemployment is unresponsive to price-level changes 
A)  The price level is not flexible 
B)  Nominal wages are unresponsive to price-level changes 
C)  Real output is unresponsive to price-level changes 
D)  Unemployment is unresponsive to price-level changes

Question 12

When the economy is experiencing cost-push inflation, an inflationary spiral is likely to result when the government adopts a hands-off policy.

Accepted Answer

A) True 
 B)False

Question 13

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the graphs above. Assume that the economy is initially at equilibrium where AD2 and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. If the government implements contractionary or restrictive policy, it would make the economy in graph 2 to:

Accepted Answer

A)  Move from point C to point B 
B)  Move from point C to point A 
C)  Move from point C to point D 
D)  Remain at point C 
A)  Move from point C to point B 
B)  Move from point C to point A 
C)  Move from point C to point D 
D)  Remain at point C

Question 15

In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a:

Accepted Answer

A)  Rightward shift of the aggregate demand curve 
B)  Leftward shift of the aggregate demand curve 
C)  Rightward shift of the long-run aggregate supply curve 
D)  Leftward shift of the long-run aggregate supply curve 
A)  Rightward shift of the aggregate demand curve 
B)  Leftward shift of the aggregate demand curve 
C)  Rightward shift of the long-run aggregate supply curve 
D)  Leftward shift of the long-run aggregate supply curve

The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience:

Refer to the graph above. If the government wishes to collect tax revenues equal to R₂, supply-side economists would strongly advise the government to set tax rates at:

If the government adopts a "hands off" approach to cost-push inflation in the economy, then in the short run there is likely to be:

A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating:

According to the simple extended AD-AS model, aggregate demand is a major determinant of the level of output in the long run.

Stagflation can be described as a:

The short-run Phillips Curve assumes an unchanging:

If the government adopts a "hands-off" policy toward inflation, then the long run effects of cost-push inflation and demand-pull inflation are identical.

Refer to the graph above. Suppose that the economy is at an initial equilibrium where the AD₁ and AS₁ curves intersect. Demand-pull inflation in the short run can best be represented as a shift of:

The Romer and Romer 2010 paper in the American Economic Review identified the major motivations for most significant legislated tax changes to be the following, except:

In the graphs below, Q_P refers to the economy's potential output level. Refer to the graphs above. Graph A is constructed on the basic assumption that:

When the economy is experiencing cost-push inflation, an inflationary spiral is likely to result when the government adopts a hands-off policy.

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

Refer to the graphs above. Assume that the economy is initially at equilibrium where AD₂ and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. If the government implements contractionary or restrictive policy, it would make the economy in graph 2 to:

In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 18: Extending the Analysis of Aggregate Supply

The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience:

Refer to the graph above. If the government wishes to collect tax revenues equal to R2, supply-side economists would strongly advise the government to set tax rates at:

If the government adopts a "hands off" approach to cost-push inflation in the economy, then in the short run there is likely to be:

A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating:

According to the simple extended AD-AS model, aggregate demand is a major determinant of the level of output in the long run.

Stagflation can be described as a:

The short-run Phillips Curve assumes an unchanging:

If the government adopts a "hands-off" policy toward inflation, then the long run effects of cost-push inflation and demand-pull inflation are identical.

Refer to the graph above. Suppose that the economy is at an initial equilibrium where the AD1 and AS1 curves intersect. Demand-pull inflation in the short run can best be represented as a shift of:

The Romer and Romer 2010 paper in the American Economic Review identified the major motivations for most significant legislated tax changes to be the following, except:

In the graphs below, QP refers to the economy's potential output level. Refer to the graphs above. Graph A is constructed on the basic assumption that:

When the economy is experiencing cost-push inflation, an inflationary spiral is likely to result when the government adopts a hands-off policy.

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

Refer to the graphs above. Assume that the economy is initially at equilibrium where AD2 and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. If the government implements contractionary or restrictive policy, it would make the economy in graph 2 to:

In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Refer to the graph above. If the government wishes to collect tax revenues equal to R₂, supply-side economists would strongly advise the government to set tax rates at:

Refer to the graph above. Suppose that the economy is at an initial equilibrium where the AD₁ and AS₁ curves intersect. Demand-pull inflation in the short run can best be represented as a shift of:

In the graphs below, Q_P refers to the economy's potential output level. Refer to the graphs above. Graph A is constructed on the basic assumption that:

Refer to the graphs above. Assume that the economy is initially at equilibrium where AD₂ and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. If the government implements contractionary or restrictive policy, it would make the economy in graph 2 to: