Question 1

In the short run, demand-pull inﬂation increases

Accepted Answer

A)  real wages, but in the long run only nominal wages. 
B)  nominal wages, but in the long run only real wages. 
C)  real output and the price level, but in the long run only real output. 
D)  real output and the price level, but in the long run only the price level. 
A)  real wages, but in the long run only nominal wages. 
B)  nominal wages, but in the long run only real wages. 
C)  real output and the price level, but in the long run only real output. 
D)  real output and the price level, but in the long run only the price level.

Question 2

Accepted Answer

A)  real output will rise above $Q _ { f }.$ 
B)  the price level will rise from $P _ { 1 } \text { to } P _ { 2 }$ 
C)  it is possible that aggregate supply will shift rightward from A $\mathrm { AS } _ { 2 }$ because nominal wage
Demands will rise. 
D)  the price level will rise from $P _ { 2 } \text { to } P _ { 3 }$ 
A)  real output will rise above $Q _ { f }.$ 
B)  the price level will rise from $P _ { 1 } \text { to } P _ { 2 }$ 
C)  it is possible that aggregate supply will shift rightward from A $\mathrm { AS } _ { 2 }$ because nominal wage
Demands will rise. 
D)  the price level will rise from $P _ { 2 } \text { to } P _ { 3 }$

Question 3

The experience of the United States with supply-side policies is that tax cuts affect the economy
more on the demand side rather than the supply side.

Accepted Answer

A) True 
 B)False

Question 4

$$\begin{array} { | c | c | } 
\hline \text { Average Tax Rate } & \text { Tax Revenue } ( \$ B ) \
\hline 20 \% & \$ 250 \
\hline 40 & 300 \
\hline 60 & 250 \
\hline 80 & 200 \
\hline
\end{array}$$ If graphed, the relationship shown would depict this economy's

Accepted Answer

A)  Laffer Curve. 
B)  Lorenz Curve. 
C)  Tax Freedom Curve. 
D)  Phillips Curve. 
A)  Laffer Curve. 
B)  Lorenz Curve. 
C)  Tax Freedom Curve. 
D)  Phillips Curve.

Question 5

In the long run, demand-pull inﬂation

Accepted Answer

A)  starts out with a shift in the AS curve but no shift of the AD curve. 
B)  starts out with a rightward shift in the AD curve, followed by a resulting leftward shift of the short-run AS curve. 
C)  starts out with a leftward shift in the AD curve, followed by a resulting rightward shift of the short-run AS curve. 
D)  involves a shift of the AD curve only, with no shift of the AS curve. 
A)  starts out with a shift in the AS curve but no shift of the AD curve. 
B)  starts out with a rightward shift in the AD curve, followed by a resulting leftward shift of the short-run AS curve. 
C)  starts out with a leftward shift in the AD curve, followed by a resulting rightward shift of the short-run AS curve. 
D)  involves a shift of the AD curve only, with no shift of the AS curve.

Question 6

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 7

In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Accepted Answer

A)  movement up and to the left along a stable Phillips curve. 
B)  movement down and to the right along a stable Phillips curve. 
C)  Phillips curve shifting to the right. 
D)  Phillips curve shifting to the left. 
A)  movement up and to the left along a stable Phillips curve. 
B)  movement down and to the right along a stable Phillips curve. 
C)  Phillips curve shifting to the right. 
D)  Phillips curve shifting to the left.

Question 8

Accepted Answer

A)  inﬂation below the natural rate. 
B)  inﬂation above the natural rate. 
C)  unemployment above the natural rate. 
D)  unemployment below the natural rate. 
A)  inﬂation below the natural rate. 
B)  inﬂation above the natural rate. 
C)  unemployment above the natural rate. 
D)  unemployment below the natural rate.

Question 9

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 10

Accepted Answer

A)  leftward shift of the aggregate supply curve from A $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 }$ 
B)  rightward shift of the aggregate demand curve from AD $A D _ { 1 } \text { to } A D _ { 2 }$ 
C)  move from d to b to a. 
D)  move from d directly to a. 
A)  leftward shift of the aggregate supply curve from A $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 }$ 
B)  rightward shift of the aggregate demand curve from AD $A D _ { 1 } \text { to } A D _ { 2 }$ 
C)  move from d to b to a. 
D)  move from d directly to a.

Question 11

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

Accepted Answer

A)  Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting more unemployment to reduce the rate of inﬂation. 
B)  Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting a higher rate of inﬂation to reduce unemployment. 
C)  Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting a higher rate of inﬂation to reduce unemployment. 
D)  Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting more unemployment to reduce the rate of inﬂation. 
A)  Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting more unemployment to reduce the rate of inﬂation. 
B)  Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting a higher rate of inﬂation to reduce unemployment. 
C)  Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting a higher rate of inﬂation to reduce unemployment. 
D)  Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting more unemployment to reduce the rate of inﬂation.

Question 12

Accepted Answer

A)  increase real output from $Q _ { f } \text { to } Q _ { 2 }$ 
B)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }$ 
C)  decrease real output from $Q _ { 2 } \text { to } Q _ { 1 }$ 
D)  move the economy from b to d. 
A)  increase real output from $Q _ { f } \text { to } Q _ { 2 }$ 
B)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }$ 
C)  decrease real output from $Q _ { 2 } \text { to } Q _ { 1 }$ 
D)  move the economy from b to d.

Question 13

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 14

Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

Accepted Answer

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

Question 15

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth
Or to reduce an inherited budget deﬁcit tend to result in

Accepted Answer

A)  a strong positive relationship between taxes and output GDP. 
B)  a weak positive relationship between taxes and output GDP. 
C)  an uncertain correlation between taxes and output GDP. 
D)  a strong negative relationship between taxes and output GDP. 
A)  a strong positive relationship between taxes and output GDP. 
B)  a weak positive relationship between taxes and output GDP. 
C)  an uncertain correlation between taxes and output GDP. 
D)  a strong negative relationship between taxes and output GDP.

Question 16

Refer to the diagram. Assume that nominal wages initially are set based on the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as

Accepted Answer

A)  a move from b to c on A $\mathrm { AS } _ { 2 }$ 
B)  a move from b to f to d. 
C)  a change of aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }$ 
D)  a move from b to d. 
A)  a move from b to c on A $\mathrm { AS } _ { 2 }$ 
B)  a move from b to f to d. 
C)  a change of aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }$ 
D)  a move from b to d.

Question 17

Refer to the graphs. Assume that the economy is initially at equilibrium where AD $A D _ { 2 }$ and AS intersect
In Graph 1, and also assume that the economy is initially at point C in Graph 2. A movement from
Point C to point B in graph 2 would most likely be associated, in graph 1, with a shift of

Accepted Answer

A)  AD to the right. 
B)  AD to the left. 
C)  AS to the right. 
D)  AS to the left. 
A)  AD to the right. 
B)  AD to the left. 
C)  AS to the right. 
D)  AS to the left.

Question 18

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 19

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6
Percent. What is the misery index for this nation?

Accepted Answer

A)  15 percent 
B)  31 percent 
C)  34 percent 
D)  53 percent 
A)  15 percent 
B)  31 percent 
C)  34 percent 
D)  53 percent

Question 20

Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

Accepted Answer

A)  Laffer Curve. 
B)  Phillips Curve. 
C)  labor demand curve. 
D)  production possibilities curve. 
A)  Laffer Curve. 
B)  Phillips Curve. 
C)  labor demand curve. 
D)  production possibilities curve.

In the short run, demand-pull inﬂation increases

The experience of the United States with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Average Tax Rate Tax Revenue (\ B) 20\% \ 250 40 300 60 250 80 200 If graphed, the relationship shown would depict this economy's

In the long run, demand-pull inﬂation

Disinﬂation occurs when

In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Stagﬂation can be described as a

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

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.

Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth Or to reduce an inherited budget deﬁcit tend to result in

Refer to the diagram. Assume that nominal wages initially are set based on the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, demand-pull inflation could best be shown as

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6 Percent. What is the misery index for this nation?

Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

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

In the short run, demand-pull inﬂation increases

The experience of the United States with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Average Tax Rate Tax Revenue (\ B) 20\% \ 250 40 300 60 250 80 200 If graphed, the relationship shown would depict this economy's

In the long run, demand-pull inﬂation

Disinﬂation occurs when

In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Stagﬂation can be described as a

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

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.

Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth Or to reduce an inherited budget deﬁcit tend to result in

Refer to the diagram. Assume that nominal wages initially are set based on the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6 Percent. What is the misery index for this nation?

Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

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 diagram. Assume that nominal wages initially are set based on the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, demand-pull inflation could best be shown as