Question 1

What will be the result if the nation experiences a technological breakthrough in the production process?

Accepted Answer

A) Business costs will rise, profits will fall, and production will decrease. 
B) Business costs will fall, but profits also will fall and production will remain at the pre-breakthrough level. 
C) Business costs will decline, improving profitability, and production will increase. 
D) Firms will make higher profits but will not increase production.

Question 2

If,due to rising demand,the price of cotton rose 15 percent while the price of other goods and services rose an average of 10 percent,what would this imply about the price and output of cotton?

Accepted Answer

A) The relative price of cotton has risen, and one would expect the output of cotton to rise as a result. 
B) The relative price of cotton has fallen, and one would expect the output of cotton to rise as a result. 
C) The relative price of cotton has risen, and one would expect the output of cotton to fall as a result. 
D) The relative price of cotton has fallen, and one would expect the output of cotton to fall as a result.

Question 3

When there is a recessionary gap in the economy,what is happening to real output in relation to the natural level of output?

Accepted Answer

A) Real output may exceed or may be less than the natural level of output. 
B) Real output is less than the natural level of output. 
C) Real output is equal to the natural level of output. 
D) Real output exceeds the natural level of output.

Question 4

What is the relationship between the level of real GDP supplied and the price level along the long-run aggregate supply curve?

Accepted Answer

A) Real GDP supplied decreases with increases in the price level. 
B) Real GDP supplied does not change with increases in the price level. 
C) Real GDP supplied increases with increases in the price level. 
D) Real GDP supplied increases with decreases in the price level.

Question 5

If money wages increase,what is the most likely outcome?

Accepted Answer

A) an increase output in the long run 
B) an decrease short-run aggregate supply 
C) an decrease output in the long run 
D) an increase short-run aggregate supply

Question 6

A change that shifted the long-run aggregate supply curve to the right would also shift the short-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 7

If the price of oil increased by 15 percent when oil producers believed that other prices were rising 10 percent over the same period,what would happen to the quantity of real output supplied by the oil industry?

Accepted Answer

The answer of If the price of oil increased by...

Question 8

Explain why the short-run supply curve is not vertical,but the long-run aggregate supply curve is vertical.

Accepted Answer

The answer of Explain why the short-run supply curve is...

Question 9

In the long run,what impact will a decrease in the price level have?

Accepted Answer

A) It will leave output prices unchanged relative to input prices. 
B) It will decrease real GDP supplied. 
C) It will raise real wages. 
D) It will increase the profit margins of many producers.

Question 10

A major drought hits the Prairies,causing sharply decreased harvests of grain.What is the most likely impact of this on short-run aggregate supply?

Accepted Answer

A) It will not shift, but the economy moves along the SRAS to a higher price level. 
B) It will decrease. 
C) It will not shift, but the economy moves along the SRAS to a lower price level. 
D) It will increase.

Question 11

What is the impact when AD shifts permanently to the right?

Accepted Answer

A) Cyclical unemployment will be lower in the short run than in the long run. 
B) LRAS will shift in response to the expansionary gap. 
C) Real output will rise in the short run but not in the long run. 
D) The price level will rise in the short run but not in the long run.

Question 12

How is the SRAS curve drawn?

Accepted Answer

A) as a vertical line 
B) as an upward sloping curve 
C) as a downward sloping curve 
D) as a horizontal line

Question 13

In the short run,what is the impact of demand-pull inflation on unemployment and the price level?

Accepted Answer

A) It increases unemployment but not the price level. 
B) It increases the price level but not unemployment. 
C) It decreases unemployment and increases the price level. 
D) It increases both unemployment and the price level.

Question 14

Figure 9-2
 
-Refer to Figure 9-2.What would a shift from AD₀ to AD₁ indicate?

Accepted Answer

A) cost-push inflation 
B) increasing SRAS 
C) decreasing real GDP 
D) increasing aggregate demand

Question 15

If investment as a fraction of GDP rose substantially and then stayed at a high level,what effect would this have on aggregate supply over time?

Accepted Answer

A) It will shift both the SRAS and LRAS right. 
B) It will shift the SRAS right, but not the LRAS. 
C) It will shift the LRAS to the left, but not the SRAS. 
D) It will shift both the SRAS and the LRAS left.

Question 16

Figure 9-1
 
-Refer to Figure 9-1.What would a shift from SRAS₀ to SRAS₁ indicate?

Accepted Answer

A) cost-push inflation 
B) increasing SRAS 
C) demand-pull inflation 
D) increasing aggregate demand

Question 17

Under what circumstances would the SRAS be vertical?

Accepted Answer

A) if there was no profit effect 
B) under no conceivable set of circumstances 
C) if there was no misperception effect 
D) if there was no profit effect or misperception effect

Question 18

Which of the following best describes the relationship between the SRAS curve and real output levels?

Accepted Answer

A) The SRAS curve is upward sloping with real output levels that vary negatively with the price level. 
B) The SRAS curve is upward sloping with real output levels that vary positively with the price level. 
C) The SRAS curve is vertical with real output levels that can be either greater than or less than the natural level of real output. 
D) The SRAS curve is vertical with real output levels that are equal to the natural level of real output at all price levels.

Question 19

If there is currently an expansionary gap,an increase in aggregate demand will make the expansionary gap smaller,but a decrease in aggregate demand will make the expansionary gap larger.

Accepted Answer