Question 1

Refer to the diagram for a speciﬁc economy. A reduction in structural unemployment or bottleneck problems in labor markets will

Accepted Answer

A)  shift this curve to the right. 
B)  shift this curve to the left. 
C)  move this economy southeast along the curve. 
D)  move this economy northwest along the curve. 
A)  shift this curve to the right. 
B)  shift this curve to the left. 
C)  move this economy southeast along the curve. 
D)  move this economy northwest along the curve.

Question 2

Stagﬂation refers to

Accepted Answer

A)  an increase in inﬂation accompanied by decreases in real output and employment. 
B)  a decline in the price level accompanied by increases in real output and employment. 
C)  a simultaneous increase in real output and the price level. 
D)  a simultaneous reduction in real output and the price level. 
A)  an increase in inﬂation accompanied by decreases in real output and employment. 
B)  a decline in the price level accompanied by increases in real output and employment. 
C)  a simultaneous increase in real output and the price level. 
D)  a simultaneous reduction in real output and the price level.

Question 3

Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are ﬂexible both upward and downward. Refer to the
Accompanying short-run aggregate supply schedules. If the price level unexpectedly increases from
100 to 125, the level of real output in the short run will

Accepted Answer

A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500. 
A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500.

Question 4

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 5

In terms of aggregate supply, the short run is a period in which

Accepted Answer

A)  the price level is constant. 
B)  employment is constant. 
C)  real output is constant. 
D)  nominal wages and other resource prices are unresponsive to price-level changes. 
A)  the price level is constant. 
B)  employment is constant. 
C)  real output is constant. 
D)  nominal wages and other resource prices are unresponsive to price-level changes.

Question 6

In the absence of unexpected shocks, the economy will tend to experience

Accepted Answer

A)  positive, noninﬂationary growth. 
B)  no changes in output or prices. 
C)  positive growth with mild amounts of deﬂation. 
D)  positive growth with mild amounts of inﬂation. 
A)  positive, noninﬂationary growth. 
B)  no changes in output or prices. 
C)  positive growth with mild amounts of deﬂation. 
D)  positive growth with mild amounts of inﬂation.

Question 7

Refer to the diagram. If drawn, the long-run aggregate supply curve would include points

Accepted Answer

A)  v, w, and u. 
B)  y, w, and u. 
C)  t, w, and z. 
D)  y, w, and x. 
A)  v, w, and u. 
B)  y, w, and u. 
C)  t, w, and z. 
D)  y, w, and x.

Question 8

What is stagﬂation, and what was one of its causes in the 1970s?

Accepted Answer

Stagﬂation is inﬂation accompanied by st

Question 9

The Laffer Curve is a central concept in

Accepted Answer

A)  monetarism. 
B)  Keynesianism. 
C)  welfare economics. 
D)  supply-side economics. 
A)  monetarism. 
B)  Keynesianism. 
C)  welfare economics. 
D)  supply-side economics.

Question 10

Supply-side economists contend that the system of taxation in the United States

Accepted Answer

A)  creates incentives to save and invest. 
B)  creates disincentives to work. 
C)  generates maximum tax revenue. 
D)  reduces the effects of cost-push inﬂation. 
A)  creates incentives to save and invest. 
B)  creates disincentives to work. 
C)  generates maximum tax revenue. 
D)  reduces the effects of cost-push inﬂation.

Question 11

Refer to the diagram and assume the economy is operating at equilibrium point w. In the short run, an increase in the price level from
$P _ { 2 } \text { to } P _ { 3 }$ would move the economy from point w to point

Accepted Answer

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

Question 12

The given curve is known as the

Accepted Answer

A)  Taylor rule. 
B)  Okun Curve. 
C)  Laffer Curve. 
D)  Phillips Curve. 
A)  Taylor rule. 
B)  Okun Curve. 
C)  Laffer Curve. 
D)  Phillips Curve.

Question 13

Refer to the diagram and assume that prices and wages are ﬂexible both upward and downward in the economy. In the extended AD-AS model,

Accepted Answer

A)  demand-pull inﬂation would involve a rightward shift of curve A, followed by a rightward shift of curve C. 
B)  cost-push inﬂation would involve ﬁrst a leftward shift of curve C, then a rightward shift of curve C. 
C)  recession would involve a leftward shift of curve A, followed by a leftward shift of curve C. 
D)  recession would involve a rightward shift of curve D, followed by leftward shifts of curves A and C. 
A)  demand-pull inﬂation would involve a rightward shift of curve A, followed by a rightward shift of curve C. 
B)  cost-push inﬂation would involve ﬁrst a leftward shift of curve C, then a rightward shift of curve C. 
C)  recession would involve a leftward shift of curve A, followed by a leftward shift of curve C. 
D)  recession would involve a rightward shift of curve D, followed by leftward shifts of curves A and C.

Question 14

Accepted Answer

A)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 3 }$ 
B)  increase real output from $Q _ { 1 } \text { to } Q _ { 2 } \text {. }$ 
C)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 } \text {. }$ 
D)  increase real output from $Q _ { f } \text { to } Q _ { 2 }$ 
A)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 3 }$ 
B)  increase real output from $Q _ { 1 } \text { to } Q _ { 2 } \text {. }$ 
C)  change aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 } \text {. }$ 
D)  increase real output from $Q _ { f } \text { to } Q _ { 2 }$

Question 15

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually
reduce the budget deﬁcit, contrary to what traditional economics teaches.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a tenet of supply-side economics?

Accepted Answer

A)  High marginal tax rates severely discourage work, saving, and investment. 
B)  Increases in Social Security taxes and other business taxes shift the aggregate supply curve to the right. 
C)  The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate. 
D)  Transfer payments increase incentives to work. 
A)  High marginal tax rates severely discourage work, saving, and investment. 
B)  Increases in Social Security taxes and other business taxes shift the aggregate supply curve to the right. 
C)  The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate. 
D)  Transfer payments increase incentives to work.

Question 17

Supply-side economists recommend higher marginal tax rates to increase aggregate supply and
real output.

Accepted Answer

A) True 
 B)False

Question 18

Since the Great Recession of 2007-2009

Accepted Answer

A)  the misery index has increased. 
B)  the misery index has remained stable. 
C)  the movement of the unemployment rate and inﬂation rate has been inconsistent with a stable Phillips Curve. 
D)  the movement of the unemployment rate and inﬂation rate has been consistent with a stable Phillips Curve. 
A)  the misery index has increased. 
B)  the misery index has remained stable. 
C)  the movement of the unemployment rate and inﬂation rate has been inconsistent with a stable Phillips Curve. 
D)  the movement of the unemployment rate and inﬂation rate has been consistent with a stable Phillips Curve.

Question 19

In the cost-push model of inﬂation, increases in nominal-wage rates that exceed increases in the productivity of labor

Accepted Answer

A)  increase aggregate supply and the price level in the economy. 
B)  increase aggregate supply and decrease the price level in the economy. 
C)  decrease aggregate supply and the price level in the economy. 
D)  decrease aggregate supply and increase the price level in the economy. 
A)  increase aggregate supply and the price level in the economy. 
B)  increase aggregate supply and decrease the price level in the economy. 
C)  decrease aggregate supply and the price level in the economy. 
D)  decrease aggregate supply and increase the price level in the economy.

Question 20

Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are ﬂexible both upward and downward. Refer to the
Accompanying short-run aggregate supply schedules. In the long run, a fall in the price level from
100 to 75 will

Accepted Answer

A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500. 
A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.

Refer to the diagram for a speciﬁc economy. A reduction in structural unemployment or bottleneck problems in labor markets will

Stagﬂation refers to

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 terms of aggregate supply, the short run is a period in which

In the absence of unexpected shocks, the economy will tend to experience

Refer to the diagram. If drawn, the long-run aggregate supply curve would include points

What is stagﬂation, and what was one of its causes in the 1970s?

The Laffer Curve is a central concept in

Supply-side economists contend that the system of taxation in the United States

The given curve is known as the

Refer to the diagram and assume that prices and wages are ﬂexible both upward and downward in the economy. In the extended AD-AS model,

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deﬁcit, contrary to what traditional economics teaches.

Which of the following is a tenet of supply-side economics?

Supply-side economists recommend higher marginal tax rates to increase aggregate supply and real output.

Since the Great Recession of 2007-2009

In the cost-push model of inﬂation, increases in nominal-wage rates that exceed increases in the productivity of labor

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

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Exam 18: Extending the Analysis of Aggregate Supply

Refer to the diagram for a speciﬁc economy. A reduction in structural unemployment or bottleneck problems in labor markets will

Stagﬂation refers to

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 terms of aggregate supply, the short run is a period in which

In the absence of unexpected shocks, the economy will tend to experience

Refer to the diagram. If drawn, the long-run aggregate supply curve would include points

What is stagﬂation, and what was one of its causes in the 1970s?

The Laffer Curve is a central concept in

Supply-side economists contend that the system of taxation in the United States

Refer to the diagram and assume the economy is operating at equilibrium point w. In the short run, an increase in the price level from P2 to P3P _ { 2 } \text { to } P _ { 3 }P2​ to P3​ would move the economy from point w to point

The given curve is known as the

Refer to the diagram and assume that prices and wages are ﬂexible both upward and downward in the economy. In the extended AD-AS model,

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deﬁcit, contrary to what traditional economics teaches.

Which of the following is a tenet of supply-side economics?

Supply-side economists recommend higher marginal tax rates to increase aggregate supply and real output.

Since the Great Recession of 2007-2009

In the cost-push model of inﬂation, increases in nominal-wage rates that exceed increases in the productivity of labor

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

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