Question 1

Adverse aggregate supply shocks would result in

Accepted Answer

A) a lower rate of inflation and a higher rate of unemployment. 
B) a higher rate of inflation and a lower rate of unemployment. 
C) a lower rate of inflation and a lower rate of unemployment. 
D) a higher rate of inflation and a higher rate of unemployment. 
A) a lower rate of inflation and a higher rate of unemployment. 
B) a higher rate of inflation and a lower rate of unemployment. 
C) a lower rate of inflation and a lower rate of unemployment. 
D) a higher rate of inflation and a higher rate of unemployment.

Question 2

Which factor contributed to the demise of stagflation during the 1982-1989 period?

Accepted Answer

A) a lessening of foreign competition 
B) the decline of the monopoly power of OPEC 
C) an increase in the per-unit cost of production 
D) an increase in regulation of the airline and trucking industries 
A) a lessening of foreign competition 
B) the decline of the monopoly power of OPEC 
C) an increase in the per-unit cost of production 
D) an increase in regulation of the airline and trucking industries

Question 3

Disinflation occurs when

Accepted Answer

A) the price level is falling. 
B) investment plans exceed saving. 
C) a speculative investment "bubble" is bursting. 
D) the inflation rate is declining. 
A) the price level is falling. 
B) investment plans exceed saving. 
C) a speculative investment "bubble" is bursting. 
D) the inflation rate is declining.

Question 4

Inflation in the short run is most likely to result from a(n)

Accepted Answer

A) increase in aggregate demand or aggregate supply. 
B) decrease in aggregate demand or aggregate supply. 
C) increase in aggregate demand or a decrease in aggregate supply. 
D) decrease in aggregate demand or an increase in aggregate supply. 
A) increase in aggregate demand or aggregate supply. 
B) decrease in aggregate demand or aggregate supply. 
C) increase in aggregate demand or a decrease in aggregate supply. 
D) decrease in aggregate demand or an increase in aggregate supply.

Question 5

One significant criticism of the major proposition of supply-side economics during the period 1980-1988 was that

Accepted Answer

A) the tight monetary policy of the Federal Reserve slowed the growth of the economy and caused a severe recession. 
B) major sectors of the economy failed to achieve optimal efficiency from increased regulation by government. 
C) there was a significant increase in the rate of unemployment over the period. 
D) growth in the productive capacity of the economy did not exceed the historical pace. 
A) the tight monetary policy of the Federal Reserve slowed the growth of the economy and caused a severe recession. 
B) major sectors of the economy failed to achieve optimal efficiency from increased regulation by government. 
C) there was a significant increase in the rate of unemployment over the period. 
D) growth in the productive capacity of the economy did not exceed the historical pace.

Question 6

In the long run, if the price level increases, then nominal wages and other input prices will

Accepted Answer

A) also rise, so firms will reduce their output level. 
B) also rise, so firms will not change their output level. 
C) not change, so firms will not change their output level. 
D) decrease, so firms will increase their output level. 
A) also rise, so firms will reduce their output level. 
B) also rise, so firms will not change their output level. 
C) not change, so firms will not change their output level. 
D) decrease, so firms will increase their output level.

Question 7

Assume that a person saves $50,000 and earns 7 percent annual interest.If the marginal tax rate is 36 percent, then the after-tax interest earnings will be

Accepted Answer

A) $2,000. 
B) $2,240. 
C) $2,760. 
D) $3,500. 
A) $2,000. 
B) $2,240. 
C) $2,760. 
D) $3,500.

Question 8

The basic problem portrayed by the traditional Phillips Curve is

Accepted Answer

A) that a level of aggregate demand sufficiently high to result in full employment may also cause inflation. 
B) that changes in the composition of total labor demand tend to be deflationary. 
C) that unemployment rises at the same time the general price level is rising. 
D) the possibility that automation will increase the level of noncyclical unemployment. 
A) that a level of aggregate demand sufficiently high to result in full employment may also cause inflation. 
B) that changes in the composition of total labor demand tend to be deflationary. 
C) that unemployment rises at the same time the general price level is rising. 
D) the possibility that automation will increase the level of noncyclical unemployment.

Question 9

In terms of aggregate supply, a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the

Accepted Answer

A) long run. 
B) short run. 
C) immediate market period. 
D) very long run. 
A) long run. 
B) short run. 
C) immediate market period. 
D) very long run.

Question 10

In the extended analysis of aggregate supply, the short-run aggregate supply curve is

Accepted Answer

A) vertical and the long-run aggregate supply curve is horizontal. 
B) horizontal and the long-run aggregate supply curve is vertical. 
C) upsloping and the long-run aggregate supply curve is vertical. 
D) horizontal and the long-run aggregate supply curve is upsloping. 
A) vertical and the long-run aggregate supply curve is horizontal. 
B) horizontal and the long-run aggregate supply curve is vertical. 
C) upsloping and the long-run aggregate supply curve is vertical. 
D) horizontal and the long-run aggregate supply curve is upsloping.

Question 11

The implication of the long-run Phillips Curve is that there is no trade-off between inflation and unemployment in the long-run.

Accepted Answer

A) True 
 B)False

Question 12

When the actual rate of inflation exceeds the expected rate

Accepted Answer

A) the unemployment rate will temporarily rise. 
B) firms will experience rising profits and thus increase their employment. 
C) the actual rate of inflation will fall. 
D) nominal wages will decline. 
A) the unemployment rate will temporarily rise. 
B) firms will experience rising profits and thus increase their employment. 
C) the actual rate of inflation will fall. 
D) nominal wages will decline.

Question 13

In 1993 the federal government boosted income tax rates.In the seven years that followed,

Accepted Answer

A) tax revenues fell slightly. 
B) productivity growth slowed. 
C) the unemployment rate increased. 
D) tax revenues expanded rapidly. 
A) tax revenues fell slightly. 
B) productivity growth slowed. 
C) the unemployment rate increased. 
D) tax revenues expanded rapidly.

Question 14

Based on the Phillips Curve, when the actual rate of inflation is greater than the expected rate, the unemployment rate will

Accepted Answer

A) rise temporarily, but decreases in nominal wages will bring the expected and actual rates of inflation into balance. 
B) rise temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance. 
C) fall temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance. 
D) fall temporarily, but decreases in nominal wages will bring the actual and expected rates of inflation into balance. 
A) rise temporarily, but decreases in nominal wages will bring the expected and actual rates of inflation into balance. 
B) rise temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance. 
C) fall temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance. 
D) fall temporarily, but decreases in nominal wages will bring the actual and expected rates of inflation into balance.

Question 15

If cost-push inflation occurs and the government adopts a hands-off policy approach, then, according to the simple extended AD-AS model, in the long run the economy will

Accepted Answer

A) get back to where it started from. 
B) get stuck with high unemployment. 
C) experience an inflationary spiral. 
D) have a higher price level. 
A) get back to where it started from. 
B) get stuck with high unemployment. 
C) experience an inflationary spiral. 
D) have a higher price level.

Question 16

If prices and wages are flexible, a decrease in aggregate demand will in the long run cause only a(n)

Accepted Answer

A) decrease in the price level. 
B) increase in the price level. 
C) increase in the unemployment rate. 
D) decrease in real output. 
A) decrease in the price level. 
B) increase in the price level. 
C) increase in the unemployment rate. 
D) decrease in real output.

Question 17

When the actual rate of inflation is less than the expected rate,

Accepted Answer

A) the unemployment rate will temporarily rise. 
B) firms will increase their output to recoup their falling profits. 
C) the unemployment rate will temporarily fall. 
D) firms will experience rising profits and thus increase their employment. 
A) the unemployment rate will temporarily rise. 
B) firms will increase their output to recoup their falling profits. 
C) the unemployment rate will temporarily fall. 
D) firms will experience rising profits and thus increase their employment.

Question 18

If government uses its stabilization policies to maintain full employment under conditions of cost-push inflation,

Accepted Answer

A) a deflationary spiral is likely to occur. 
B) an inflationary spiral is likely to occur. 
C) stagflation is likely to occur. 
D) the Phillips Curve is likely to shift inward. 
A) a deflationary spiral is likely to occur. 
B) an inflationary spiral is likely to occur. 
C) stagflation is likely to occur. 
D) the Phillips Curve is likely to shift inward.

Question 19

In the short run, nominal wages and other input prices are assumed to be

Accepted Answer

A) unresponsive to product price-level changes, but in the long run they are assumed to be responsive. 
B) unresponsive to product price-level changes, and in the long run they are assumed to be unresponsive also. 
C) responsive to product price-level changes, but in the long run they are assumed to be unresponsive. 
D) responsive to product price-level changes, and in the long run they are assumed to be responsive also. 
A) unresponsive to product price-level changes, but in the long run they are assumed to be responsive. 
B) unresponsive to product price-level changes, and in the long run they are assumed to be unresponsive also. 
C) responsive to product price-level changes, but in the long run they are assumed to be unresponsive. 
D) responsive to product price-level changes, and in the long run they are assumed to be responsive also.

Question 20

A potential cause of stagflation is

Accepted Answer

A) agricultural surpluses. 
B) declining productivity. 
C) improving labor productivity. 
D) a rise in the value of the dollar. 
A) agricultural surpluses. 
B) declining productivity. 
C) improving labor productivity. 
D) a rise in the value of the dollar.

Exam 38: Extending the Analysis of Aggregate Supply

Adverse aggregate supply shocks would result in

Which factor contributed to the demise of stagflation during the 1982-1989 period?

Disinflation occurs when

Inflation in the short run is most likely to result from a(n)

One significant criticism of the major proposition of supply-side economics during the period 1980-1988 was that

In the long run, if the price level increases, then nominal wages and other input prices will

Assume that a person saves $50,000 and earns 7 percent annual interest.If the marginal tax rate is 36 percent, then the after-tax interest earnings will be

The basic problem portrayed by the traditional Phillips Curve is

In terms of aggregate supply, a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the

In the extended analysis of aggregate supply, the short-run aggregate supply curve is

The implication of the long-run Phillips Curve is that there is no trade-off between inflation and unemployment in the long-run.

When the actual rate of inflation exceeds the expected rate

In 1993 the federal government boosted income tax rates.In the seven years that followed,

Based on the Phillips Curve, when the actual rate of inflation is greater than the expected rate, the unemployment rate will

If cost-push inflation occurs and the government adopts a hands-off policy approach, then, according to the simple extended AD-AS model, in the long run the economy will

If prices and wages are flexible, a decrease in aggregate demand will in the long run cause only a(n)

When the actual rate of inflation is less than the expected rate,

If government uses its stabilization policies to maintain full employment under conditions of cost-push inflation,

In the short run, nominal wages and other input prices are assumed to be

A potential cause of stagflation is

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

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

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

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