Question 1

Refer to the diagram for a speciﬁc economy. Which of the following best describes the relationship shown by this curve?

Accepted Answer

A)  The demand for labor is large when the rate of inﬂation is low. 
B)  When the rate of unemployment is high, the rate of inﬂation is high. 
C)  The rate of inﬂation and the rate of unemployment are inversely related. 
D)  The rate of inﬂation and the rate of unemployment are directly related. 
A)  The demand for labor is large when the rate of inﬂation is low. 
B)  When the rate of unemployment is high, the rate of inﬂation is high. 
C)  The rate of inﬂation and the rate of unemployment are inversely related. 
D)  The rate of inﬂation and the rate of unemployment are directly related. C

Question 2

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to
price level increases.

Accepted Answer

A) True 
 B)False  True

Question 3

The idea that reductions in tax rates will increase tax revenue is illustrated by the

Accepted Answer

A)  Laffer Curve. 
B)  short-run Phillips Curve. 
C)  long-run Phillips Curve. 
D)  aggregate supply curve. 
A)  Laffer Curve. 
B)  short-run Phillips Curve. 
C)  long-run Phillips Curve. 
D)  aggregate supply curve. A

Question 4

There is no trade-off between unemployment and inﬂation in the long run.

Accepted Answer

A) True 
 B)False

Question 5

What will occur in the short run if there is cost-push inﬂation and the government adopts a hands-off approach to it?

Accepted Answer

A)  an increase in real output 
B)  an inﬂationary spiral 
C)  low unemployment and a loss of real output 
D)  high unemployment and a loss of real output 
A)  an increase in real output 
B)  an inﬂationary spiral 
C)  low unemployment and a loss of real output 
D)  high unemployment and a loss of real output

Question 6

Explain the reasoning behind why the long-run aggregate supply curve is vertical.

Accepted Answer

The long-run aggregate supply curve is v

Question 7

An adverse aggregate supply shock could result from

Accepted Answer

A)  a sharp rise in productivity. 
B)  a rapid rise in oil prices. 
C)  a decline in wages. 
D)  an appreciation of the dollar. 
A)  a sharp rise in productivity. 
B)  a rapid rise in oil prices. 
C)  a decline in wages. 
D)  an appreciation of the dollar.

Question 8

Accepted Answer

A)  v. 
B)  x. 
C)  t. 
D)  y. 
A)  v. 
B)  x. 
C)  t. 
D)  y.

Question 9

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 10

Refer to the graph. If the government wants to collect tax revenues equal to R $R _ { 2 }$ , then the tax rate
Should be set at

Accepted Answer

A)  $T _ { 2 } \text { or } T _ { 3 }$ 
B)  $T _ { 2 } \text { only. }$ 
C)  $T _ { 4 } \text { only. }$ 
D)  $T _ { 2 } \text { or } T _ { 4 }$ 
A)  $T _ { 2 } \text { or } T _ { 3 }$ 
B)  $T _ { 2 } \text { only. }$ 
C)  $T _ { 4 } \text { only. }$ 
D)  $T _ { 2 } \text { or } T _ { 4 }$

Question 11

Accepted Answer

A)  v. 
B)  x. 
C)  u. 
D)  y. 
A)  v. 
B)  x. 
C)  u. 
D)  y.

Question 12

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 13

How do economies experience ongoing inﬂation when achieving economic growth?

Accepted Answer

Any inﬂation that accompanies economic g

Question 14

With demand-pull inﬂation in the extended AD-AS model, there is

Accepted Answer

A)  a decrease in aggregate demand and a decrease in unemployment that eventually increases nominal wages. 
B)  an increase in aggregate demand and a decrease in unemployment that eventually decreases nominal wages. 
C)  an increase in aggregate demand and an increase in unemployment that eventually decreases nominal wages. 
D)  an increase in aggregate demand and a decrease in unemployment that eventually increases nominal wages. 
A)  a decrease in aggregate demand and a decrease in unemployment that eventually increases nominal wages. 
B)  an increase in aggregate demand and a decrease in unemployment that eventually decreases nominal wages. 
C)  an increase in aggregate demand and an increase in unemployment that eventually decreases nominal wages. 
D)  an increase in aggregate demand and a decrease in unemployment that eventually increases nominal wages.

Question 15

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 16

Critics of supply-side economics

Accepted Answer

A)  argue that a tax cut will increase aggregate supply by more than it increases aggregate demand. 
B)  contend that the relationship between tax rates and economic incentives is small and of uncertain direction. 
C)  believe that a decline in tax rates will increase tax revenues. 
D)  point out that tax cuts enable households to substitute work for leisure. 
A)  argue that a tax cut will increase aggregate supply by more than it increases aggregate demand. 
B)  contend that the relationship between tax rates and economic incentives is small and of uncertain direction. 
C)  believe that a decline in tax rates will increase tax revenues. 
D)  point out that tax cuts enable households to substitute work for leisure.

Question 17

What is the basic difference between the short run and long run as these terms relate to
macroeconomics? Why does this difference occur?

Accepted Answer

The basic difference between the short r

Question 18

Compare and contrast the short-run Phillips curve and the long-run Phillips curve.

Accepted Answer

Increases in aggregate demand beyond tho

Question 19

Which of the following is a true statement?

Accepted Answer

A)  There is a long-run trade-off between inﬂation and unemployment. 
B)  There is no trade-off between inﬂation and unemployment in the short-run. 
C)  The short-run Phillips Curve is horizontal. 
D)  The long-run Phillips Curve is vertical. 
A)  There is a long-run trade-off between inﬂation and unemployment. 
B)  There is no trade-off between inﬂation and unemployment in the short-run. 
C)  The short-run Phillips Curve is horizontal. 
D)  The long-run Phillips Curve is vertical.

Question 20

Accepted Answer

A)  $A D _ { 1 }$ to $A D _ { 2 }$, which increases the price level from $P _ { 1 }$ to $P _ { 2 }$ and increases real domestic output from $Q _ { 3 }$ to $Q _ { 2 }$. 
B)  $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$, which increases the price level from $P _ { 1 }$ to $P _ { 2 }$ and decreases real output from $Q _ { 1 }$ to $Q _ { 2 }$ 
C)  $\mathrm { AD } _ { 1 }$ to $A \mathrm { D } _ { 2 }$, which increases the price level from $P _ { 2 }$ to $P _ { 3 }$ and increases real output from $Q _ { 2 }$ to $Q _ { 1 }$ 
D)  $\mathrm { AS } _ { 2 }$ to $\mathrm { AS } _ { 3 }$, which increases the price level from $P _ { 2 }$ to $P _ { 3 }$ and decreases real output from $Q _ { 2 }$ to $Q _ { 3 }$. 
A)  $A D _ { 1 }$ to $A D _ { 2 }$, which increases the price level from $P _ { 1 }$ to $P _ { 2 }$ and increases real domestic output from $Q _ { 3 }$ to $Q _ { 2 }$. 
B)  $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$, which increases the price level from $P _ { 1 }$ to $P _ { 2 }$ and decreases real output from $Q _ { 1 }$ to $Q _ { 2 }$ 
C)  $\mathrm { AD } _ { 1 }$ to $A \mathrm { D } _ { 2 }$, which increases the price level from $P _ { 2 }$ to $P _ { 3 }$ and increases real output from $Q _ { 2 }$ to $Q _ { 1 }$ 
D)  $\mathrm { AS } _ { 2 }$ to $\mathrm { AS } _ { 3 }$, which increases the price level from $P _ { 2 }$ to $P _ { 3 }$ and decreases real output from $Q _ { 2 }$ to $Q _ { 3 }$.

Refer to the diagram for a speciﬁc economy. Which of the following best describes the relationship shown by this curve?

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

The idea that reductions in tax rates will increase tax revenue is illustrated by the

There is no trade-off between unemployment and inﬂation in the long run.

What will occur in the short run if there is cost-push inﬂation and the government adopts a hands-off approach to it?

Explain the reasoning behind why the long-run aggregate supply curve is vertical.

An adverse aggregate supply shock could result from

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

$Refer to the graph. If the government wants to collect tax revenues equal to R R _ { 2 } , then the tax rate Should be set at$ Refer to the graph. If the government wants to collect tax revenues equal to R $R _ { 2 }$ , then the tax rate Should be set at

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

How do economies experience ongoing inﬂation when achieving economic growth?

With demand-pull inﬂation in the extended AD-AS model, there is

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

Critics of supply-side economics

What is the basic difference between the short run and long run as these terms relate to macroeconomics? Why does this difference occur?

Compare and contrast the short-run Phillips curve and the long-run Phillips curve.

Which of the following is a true statement?

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

Refer to the diagram for a speciﬁc economy. Which of the following best describes the relationship shown by this curve?

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

The idea that reductions in tax rates will increase tax revenue is illustrated by the

There is no trade-off between unemployment and inﬂation in the long run.

What will occur in the short run if there is cost-push inﬂation and the government adopts a hands-off approach to it?

Explain the reasoning behind why the long-run aggregate supply curve is vertical.

An adverse aggregate supply shock could result from

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

Refer to the graph. If the government wants to collect tax revenues equal to R R2R _ { 2 }R2​ , then the tax rate Should be set at

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

How do economies experience ongoing inﬂation when achieving economic growth?

With demand-pull inﬂation in the extended AD-AS model, there is

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

Critics of supply-side economics

What is the basic difference between the short run and long run as these terms relate to macroeconomics? Why does this difference occur?

Compare and contrast the short-run Phillips curve and the long-run Phillips curve.

Which of the following is a true statement?

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

$Refer to the graph. If the government wants to collect tax revenues equal to R R _ { 2 } , then the tax rate Should be set at$ Refer to the graph. If the government wants to collect tax revenues equal to R $R _ { 2 }$ , then the tax rate Should be set at