Question 1

Which of the following is true of an expansionary gap?

Accepted Answer

A) It develops when the expected price level exceeds the actual price level. 
B) In the long run,this gap will close when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output falls short of the economy's potential. 
D) In the long run,this gap will close when the short-run aggregate supply curve shifts rightward. 
E) In the long run,this gap will close when resource suppliers negotiate higher resource payments. 
A) It develops when the expected price level exceeds the actual price level. 
B) In the long run,this gap will close when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output falls short of the economy's potential. 
D) In the long run,this gap will close when the short-run aggregate supply curve shifts rightward. 
E) In the long run,this gap will close when resource suppliers negotiate higher resource payments. E

Question 2

In the aggregate demand-aggregate supply model,which of these changes is most likely when the cost of production increases in the long run?

Accepted Answer

A) A leftward shift of the short-run aggregate supply curve 
B) A leftward shift of the short-run aggregate demand curve 
C) A rightward shift of the short-run aggregate supply curve 
D) An increase in the potential output level increases. 
E) A decrease in the actual price level decreases. 
A) A leftward shift of the short-run aggregate supply curve 
B) A leftward shift of the short-run aggregate demand curve 
C) A rightward shift of the short-run aggregate supply curve 
D) An increase in the potential output level increases. 
E) A decrease in the actual price level decreases. A

Question 3

The figure below shows the equilibrium in an aggregate demand-aggregate supply model.In this figure,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. E

Question 4

Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels.

Accepted Answer

A) True 
 B)False

Question 5

The figure below shows the short-run aggregate supply curve of an economy.If the actual price level exceeds the expected price level,then:
 
​

Accepted Answer

A) equilibrium output is likely to be Y2 in the short run. 
B) equilibrium output is likely to be Y1 in the short run. 
C) equilibrium output is likely to be Y3 in the short run. 
D) potential output is greater than actual output. 
E) unemployment is above the natural rate. 
A) equilibrium output is likely to be Y2 in the short run. 
B) equilibrium output is likely to be Y1 in the short run. 
C) equilibrium output is likely to be Y3 in the short run. 
D) potential output is greater than actual output. 
E) unemployment is above the natural rate.

Question 6

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 7

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

Accepted Answer

A) Real wages will increase by 2 percent per year. 
B) Real wages will increase by 3 percent per year. 
C) Real wages will decrease by 3 percent per year. 
D) Real wages will decrease by 2 percent per year. 
E) Real wages will remain constant. 
A) Real wages will increase by 2 percent per year. 
B) Real wages will increase by 3 percent per year. 
C) Real wages will decrease by 3 percent per year. 
D) Real wages will decrease by 2 percent per year. 
E) Real wages will remain constant.

Question 8

If the actual price level is less than the expected price level reflected in long-term contracts,_____.

Accepted Answer

A) firms will find production more profitable in the short run than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied 
D) resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied 
E) unemployment will increase in the short run as firms will substitute labor with capital inputs 
A) firms will find production more profitable in the short run than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied 
D) resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied 
E) unemployment will increase in the short run as firms will substitute labor with capital inputs

Question 9

The aggregate demand-aggregate supply model shows that closing an expansionary gap involves deflation and closing a recessionary gap involves inflation.

Accepted Answer

A) True 
 B)False

Question 10

A nominal wage is:

Accepted Answer

A) always equal to the legal minimum wage. 
B) the same as the efficiency wage. 
C) measured in terms of the amount of goods and services it can purchase. 
D) measured in current dollars rather than in constant dollars. 
E) measured in constant dollars rather than in current dollars. 
A) always equal to the legal minimum wage. 
B) the same as the efficiency wage. 
C) measured in terms of the amount of goods and services it can purchase. 
D) measured in current dollars rather than in constant dollars. 
E) measured in constant dollars rather than in current dollars.

Question 11

The nominal wage represents:

Accepted Answer

A) the wage measured in terms of the quantity of goods and services a worker can purchase with it. 
B) the wage measured in terms of the dollar value of the goods and services a worker can purchase with it. 
C) the real wage from which personal taxes has been deducted. 
D) the standard of living of workers across time. 
E) the change in real wage brought about by changes in aggregate supply. 
A) the wage measured in terms of the quantity of goods and services a worker can purchase with it. 
B) the wage measured in terms of the dollar value of the goods and services a worker can purchase with it. 
C) the real wage from which personal taxes has been deducted. 
D) the standard of living of workers across time. 
E) the change in real wage brought about by changes in aggregate supply.

Question 12

Potential output depends on all of the following except one.Which is the exception?

Accepted Answer

A) The supply of labor 
B) Labor productivity 
C) Household choices regarding labor and leisure 
D) The technology in current use 
E) The number of consumers in the market 
A) The supply of labor 
B) Labor productivity 
C) Household choices regarding labor and leisure 
D) The technology in current use 
E) The number of consumers in the market

Question 13

The figure shows the determination of the equilibrium price level and real GDP in an aggregate demand-aggregate supply model.Which of the following economic changes is depicted by a movement from point e to point e'?

Accepted Answer

A) An increase in short-run aggregate supply 
B) An increase in long-run aggregate supply 
C) A decrease in short-run aggregate supply 
D) A decrease in long-run aggregate supply 
E) An increase in the aggregate quantity demanded 
A) An increase in short-run aggregate supply 
B) An increase in long-run aggregate supply 
C) A decrease in short-run aggregate supply 
D) A decrease in long-run aggregate supply 
E) An increase in the aggregate quantity demanded

Question 14

The short run is a period of time during which:

Accepted Answer

A) there is an expansionary gap that cannot be corrected using the passive approach. 
B) actual output equals potential output. 
C) there is a recessionary gap that cannot be corrected through discretionary policy. 
D) resource buyers and sellers cannot adjust fully to changes in the price level. 
E) resource buyers and sellers can adjust fully to changes in the price level. 
A) there is an expansionary gap that cannot be corrected using the passive approach. 
B) actual output equals potential output. 
C) there is a recessionary gap that cannot be corrected through discretionary policy. 
D) resource buyers and sellers cannot adjust fully to changes in the price level. 
E) resource buyers and sellers can adjust fully to changes in the price level.

Question 15

Which of the following explains the shape of the short-run aggregate supply curve?

Accepted Answer

A) The inverse relationship between the quantity supplied and the cost per 
B) The direct relationship between the quantity supplied and the cost per unit 
C) The direct relationship between the quantity supplied and the price level 
D) The inverse relationship between quantity supplied and GDP 
E) The inverse relationship between quantity supplied and the profit per unit 
A) The inverse relationship between the quantity supplied and the cost per 
B) The direct relationship between the quantity supplied and the cost per unit 
C) The direct relationship between the quantity supplied and the price level 
D) The inverse relationship between quantity supplied and GDP 
E) The inverse relationship between quantity supplied and the profit per unit

Question 16

Which of the following is true when an economy is in long-run equilibrium?

Accepted Answer

A) Actual output can exceed potential output. 
B) Potential output can exceed actual output. 
C) Actual output must equal potential output. 
D) Real GDP must equal nominal GDP. 
E) Expected price level can exceed actual price level. 
A) Actual output can exceed potential output. 
B) Potential output can exceed actual output. 
C) Actual output must equal potential output. 
D) Real GDP must equal nominal GDP. 
E) Expected price level can exceed actual price level.

Question 17

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):

Accepted Answer

A) increase in short-run aggregate supply. 
B) increase in long-run aggregate supply. 
C) decrease in short-run aggregate supply. 
D) decrease in long-run aggregate supply. 
E) decrease in the aggregate quantity demanded. 
A) increase in short-run aggregate supply. 
B) increase in long-run aggregate supply. 
C) decrease in short-run aggregate supply. 
D) decrease in long-run aggregate supply. 
E) decrease in the aggregate quantity demanded.

Question 18

The potential output of an economy is:

Accepted Answer

A) the output level at which inflation is very high. 
B) the output level at which nominal GDP is equal to real GDP. 
C) less than the full-employment rate of output. 
D) the output level at which total unemployment is zero. 
E) also referred to as the natural rate of output. 
A) the output level at which inflation is very high. 
B) the output level at which nominal GDP is equal to real GDP. 
C) less than the full-employment rate of output. 
D) the output level at which total unemployment is zero. 
E) also referred to as the natural rate of output.

Question 19

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 20

When the actual price level in an economy turns out to be lower than that expected in the short run,_____.

Accepted Answer

A) businesses cut back production 
B) the potential output level decreases 
C) the aggregate supply curve shifts leftward 
D) the aggregate supply curve shifts rightward 
E) an expansionary gap develops 
A) businesses cut back production 
B) the potential output level decreases 
C) the aggregate supply curve shifts leftward 
D) the aggregate supply curve shifts rightward 
E) an expansionary gap develops

Which of the following is true of an expansionary gap?

In the aggregate demand-aggregate supply model,which of these changes is most likely when the cost of production increases in the long run?

The figure below shows the equilibrium in an aggregate demand-aggregate supply model.In this figure,which of the following is true for an economy that is at point V in the short run?

Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels.

The figure below shows the short-run aggregate supply curve of an economy.If the actual price level exceeds the expected price level,then:

Which of the following is true?

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

If the actual price level is less than the expected price level reflected in long-term contracts,_____.

The aggregate demand-aggregate supply model shows that closing an expansionary gap involves deflation and closing a recessionary gap involves inflation.

A nominal wage is:

The nominal wage represents:

Potential output depends on all of the following except one.Which is the exception?

The figure shows the determination of the equilibrium price level and real GDP in an aggregate demand-aggregate supply model.Which of the following economic changes is depicted by a movement from point e to point e'?

The short run is a period of time during which:

Which of the following explains the shape of the short-run aggregate supply curve?

Which of the following is true when an economy is in long-run equilibrium?

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):

The potential output of an economy is:

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

When the actual price level in an economy turns out to be lower than that expected in the short run,_____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us 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

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 10: Aggregate Supply

Which of the following is true of an expansionary gap?

In the aggregate demand-aggregate supply model,which of these changes is most likely when the cost of production increases in the long run?

The figure below shows the equilibrium in an aggregate demand-aggregate supply model.In this figure,which of the following is true for an economy that is at point V in the short run?

Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels.

The figure below shows the short-run aggregate supply curve of an economy.If the actual price level exceeds the expected price level,then: ​

Which of the following is true?

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

If the actual price level is less than the expected price level reflected in long-term contracts,_____.

The aggregate demand-aggregate supply model shows that closing an expansionary gap involves deflation and closing a recessionary gap involves inflation.

A nominal wage is:

The nominal wage represents:

Potential output depends on all of the following except one.Which is the exception?

The figure shows the determination of the equilibrium price level and real GDP in an aggregate demand-aggregate supply model.Which of the following economic changes is depicted by a movement from point e to point e'?

The short run is a period of time during which:

Which of the following explains the shape of the short-run aggregate supply curve?

Which of the following is true when an economy is in long-run equilibrium?

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):

The potential output of an economy is:

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

When the actual price level in an economy turns out to be lower than that expected in the short run,_____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us 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

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

The figure below shows the short-run aggregate supply curve of an economy.If the actual price level exceeds the expected price level,then: