Question 1

A rightward shift of the Phillips Curve suggests that a lower rate of unemployment is associated with
each inﬂation rate.

Accepted Answer

A) True 
 B)False

Question 2

In the short run, if the actual rate of inﬂation falls lower than the expected rate, then

Accepted Answer

A)  proﬁts will temporarily fall and unemployment will temporarily rise. 
B)  proﬁts will temporarily rise and unemployment will temporarily fall. 
C)  nominal wages will rise, proﬁts will rise, and unemployment will fall. 
D)  nominal wages will fall, proﬁts will fall, and unemployment will rise. 
A)  proﬁts will temporarily fall and unemployment will temporarily rise. 
B)  proﬁts will temporarily rise and unemployment will temporarily fall. 
C)  nominal wages will rise, proﬁts will rise, and unemployment will fall. 
D)  nominal wages will fall, proﬁts will fall, and unemployment will rise.

Question 3

Accepted Answer

A)  a shift of aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$, followed by a shift of aggregate supply from $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$. 
B)  a move from d to b to a. 
C)  a shift of aggregate supply from $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$, followed by a shift of aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$ 
D)  a move from a to d. 
A)  a shift of aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$, followed by a shift of aggregate supply from $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$. 
B)  a move from d to b to a. 
C)  a shift of aggregate supply from $\mathrm { AS } _ { 1 }$ to $\mathrm { AS } _ { 2 }$, followed by a shift of aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$ 
D)  a move from a to d.

Question 4

Refer to the graph. Assume that the economy is initially at equilibrium at point A. If there is a recession in the economy because AD
$A D _ { 1 } \text { shifts to } A D _ { 2 } \text {, }$ , and wages and prices are ?exible, then in the
Long run the price level will be

Accepted Answer

A)  $P _ { 2 } \text { and real output will be } Q _ { f } \text {. }$ 
B)  $P _ { 3 } \text { and real output will be } Q _ { f } \text {. }$ 
C)  $P _ { 1 } \text { and real output will be } Q _ { f } \text {. }$ 
D)  P2 and real output will be Q1. 
A)  $P _ { 2 } \text { and real output will be } Q _ { f } \text {. }$ 
B)  $P _ { 3 } \text { and real output will be } Q _ { f } \text {. }$ 
C)  $P _ { 1 } \text { and real output will be } Q _ { f } \text {. }$ 
D)  P2 and real output will be Q1.

Question 5

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 6

Refer to the graph. What events would tend to temporarily move the economy from point $B _ { 2 } \text { to } C _ { 2 }$ ?

Accepted Answer

A)  a tight monetary policy 
B)  a contractionary ?scal policy 
C)  an easy money policy 
D)  an increase in aggregate supply 
A)  a tight monetary policy 
B)  a contractionary ?scal policy 
C)  an easy money policy 
D)  an increase in aggregate supply

Question 7

Refer to the graphs. Assume that the economy starts out at point D in Graph 2, whereas full employment would be attained at point C. The Phillips curve shown suggests that full employment

Accepted Answer

A)  can be attained only with a higher inﬂation rate. 
B)  may be attained along with a lower inﬂation rate. 
C)  cannot be attained regardless of inﬂation rate. 
D)  can be attained by implementing restrictive ﬁscal or monetary policy. 
A)  can be attained only with a higher inﬂation rate. 
B)  may be attained along with a lower inﬂation rate. 
C)  cannot be attained regardless of inﬂation rate. 
D)  can be attained by implementing restrictive ﬁscal or monetary policy.

Question 8

Which event probably contributed to the stagﬂation of the 1970s?

Accepted Answer

A)  worldwide agricultural surpluses 
B)  an improvement in productivity of resources 
C)  an appreciation in the dollar 
D)  a sharp rise in the price of oil 
A)  worldwide agricultural surpluses 
B)  an improvement in productivity of resources 
C)  an appreciation in the dollar 
D)  a sharp rise in the price of oil

Question 9

What are the major criticisms of the Laffer curve?

Accepted Answer

Critics say empirical evidence shows tha

Question 10

The short-run aggregate supply curve

Accepted Answer

A)  is vertical, and the long-run aggregate supply curve is vertical. 
B)  slopes upward, and the long-run aggregate supply curve also slopes upward. 
C)  slopes upward, but the long-run aggregate supply curve is horizontal. 
D)  slopes upward, but the long-run aggregate supply curve is vertical. 
A)  is vertical, and the long-run aggregate supply curve is vertical. 
B)  slopes upward, and the long-run aggregate supply curve also slopes upward. 
C)  slopes upward, but the long-run aggregate supply curve is horizontal. 
D)  slopes upward, but the long-run aggregate supply curve is vertical.

Question 11

Most economists think that

Accepted Answer

A)  supply-side effects of a tax cut exceed the demand-side effects. 
B)  demand-side effects of a tax cut exceed the supply-side effects. 
C)  demand-side and supply-side effects of a tax cut offset each other. 
D)  there are only supply-side effects from a tax cut. 
A)  supply-side effects of a tax cut exceed the demand-side effects. 
B)  demand-side effects of a tax cut exceed the supply-side effects. 
C)  demand-side and supply-side effects of a tax cut offset each other. 
D)  there are only supply-side effects from a tax cut.

Question 12

Refer to the graph. Stag?ation in the short run is best represented as resulting from a shift of

Accepted Answer

A)  $A D _ { 1 } \text { to } A D _ { 2 } \text {, given a stable } A S _ { 1 } \text { curve. }$ 
B)  $A D _ { 2 } \text { to } A D _ { 1 } \text {, given a stable } A S _ { 1 } \text { curve. }$ 
C)  $A S _ { 1 } \text { to } A S _ { 2 } \text {, given a stable } A D _ { 1 } \text { curve. }$ 
D)  $\mathrm { AS } _ { 2 } \text { to } A S _ { 1 } \text {, given a stable } A D _ { 1 } \text { curve. }$ 
A)  $A D _ { 1 } \text { to } A D _ { 2 } \text {, given a stable } A S _ { 1 } \text { curve. }$ 
B)  $A D _ { 2 } \text { to } A D _ { 1 } \text {, given a stable } A S _ { 1 } \text { curve. }$ 
C)  $A S _ { 1 } \text { to } A S _ { 2 } \text {, given a stable } A D _ { 1 } \text { curve. }$ 
D)  $\mathrm { AS } _ { 2 } \text { to } A S _ { 1 } \text {, given a stable } A D _ { 1 } \text { curve. }$

Question 13

Refer to the graphs. An increase in an economy's labor productivity would shift curve

Accepted Answer

A)  AB to CD and shift curve Y to X. 
B)  CD to AB and shift curve X to Y. 
C)  AB to CD and shift curve X to Y. 
D)  X to Y, while leaving curve AB in place. 
A)  AB to CD and shift curve Y to X. 
B)  CD to AB and shift curve X to Y. 
C)  AB to CD and shift curve X to Y. 
D)  X to Y, while leaving curve AB in place.

Question 14

A senator states, "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this
Policy would likely reply that

Accepted Answer

A)  rather than cutting taxes, there should be a decrease in government spending to address the problem. 
B)  rather than cutting taxes, monetary policy should become tighter to control the inﬂation rate. 
C)  increasing government spending is a surer way to increase production and pull the nation out of this economic slump. 
D)  cutting taxes will only reduce output further and aggravate the situation. 
A)  rather than cutting taxes, there should be a decrease in government spending to address the problem. 
B)  rather than cutting taxes, monetary policy should become tighter to control the inﬂation rate. 
C)  increasing government spending is a surer way to increase production and pull the nation out of this economic slump. 
D)  cutting taxes will only reduce output further and aggravate the situation.

Question 15

What is the long-run equilibrium in the extended aggregate demand and aggregate supply model?

Accepted Answer

Long-run equilibrium occurs at the inter

Question 16

The short-run aggregate supply curve is upsloping because higher price levels

Accepted Answer

A)  lower interest rates and encourage ﬁrms to invest and produce more. 
B)  create incentives to expand output when resource prices are unresponsive to price-level changes. 
C)  encourage importation of foreign goods. 
D)  create an expectation among producers of still higher price levels. 
A)  lower interest rates and encourage ﬁrms to invest and produce more. 
B)  create incentives to expand output when resource prices are unresponsive to price-level changes. 
C)  encourage importation of foreign goods. 
D)  create an expectation among producers of still higher price levels.

Question 17

Accepted Answer

A)  nominal wages and other input prices are assumed to be ?xed. 
B)  $\text { real output level } Q _ { f } \text { is the potential level of output. }$ 
C)  price level increases produce perfectly offsetting changes in nominal wages and other input prices. 
D)  higher-than-expected rates of actual in?ation reduce real output only temporarily. 
A)  nominal wages and other input prices are assumed to be ?xed. 
B)  $\text { real output level } Q _ { f } \text { is the potential level of output. }$ 
C)  price level increases produce perfectly offsetting changes in nominal wages and other input prices. 
D)  higher-than-expected rates of actual in?ation reduce real output only temporarily.

Question 18

Refer to the graph. If the economy is initially at equilibrium at the intersection of AD1 and AS1 and there is a tax cut, then, from a skeptical mainstream perspective, the immediate impact is that
Aggregate

Accepted Answer

A)  demand would increase to AD $\mathrm { AD } _ { 2 }$ and aggregate supply would increase to A
$\mathrm { AS } _ { 2 }$ 
B)  demand would increase to AD $\mathrm { AD } _ { 2 }$ and aggregate supply would remain at A
$\mathrm { AS } _ { 1 } .$ 
C)  supply would increase to A $\mathrm { AS } _ { 2 }$ and aggregate demand would remain at AD
$A D _ { 1 }$ 
D)  demand would remain at AD $A D _ { 1 }$ and aggregate supply would remain at A
$\mathrm { AS } _ { 1 }$ 
A)  demand would increase to AD $\mathrm { AD } _ { 2 }$ and aggregate supply would increase to A
$\mathrm { AS } _ { 2 }$ 
B)  demand would increase to AD $\mathrm { AD } _ { 2 }$ and aggregate supply would remain at A
$\mathrm { AS } _ { 1 } .$ 
C)  supply would increase to A $\mathrm { AS } _ { 2 }$ and aggregate demand would remain at AD
$A D _ { 1 }$ 
D)  demand would remain at AD $A D _ { 1 }$ and aggregate supply would remain at A
$\mathrm { AS } _ { 1 }$

Question 19

A rightward shift of the Phillips Curve suggests that

Accepted Answer

A)  a higher rate of unemployment is associated with each level of inﬂation rate. 
B)  a lower rate of inﬂation is associated with each level of unemployment rate. 
C)  the aggregate supply curve has shifted to the right. 
D)  the aggregate demand curve has shifted to the left. 
A)  a higher rate of unemployment is associated with each level of inﬂation rate. 
B)  a lower rate of inﬂation is associated with each level of unemployment rate. 
C)  the aggregate supply curve has shifted to the right. 
D)  the aggregate demand curve has shifted to the left.

Question 20

In the extended aggregate demand-aggregate supply model,

Accepted Answer

A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve. 
B)  the long-run aggregate supply curve is horizontal. 
C)  the price level is the same regardless of the location of the aggregate demand curve. 
D)  long-run equilibrium occurs at the intersection of the aggregate demand curve, the short- run aggregate supply curve, and the long-run aggregate supply curve. 
A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve. 
B)  the long-run aggregate supply curve is horizontal. 
C)  the price level is the same regardless of the location of the aggregate demand curve. 
D)  long-run equilibrium occurs at the intersection of the aggregate demand curve, the short- run aggregate supply curve, and the long-run aggregate supply curve.

A rightward shift of the Phillips Curve suggests that a lower rate of unemployment is associated with each inﬂation rate.

In the short run, if the actual rate of inﬂation falls lower than the expected rate, then

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

$Refer to the graph. What events would tend to temporarily move the economy from point B _ { 2 } \text { to } C _ { 2 } ?$ Refer to the graph. What events would tend to temporarily move the economy from point $B _ { 2 } \text { to } C _ { 2 }$ ?

Refer to the graphs. Assume that the economy starts out at point D in Graph 2, whereas full employment would be attained at point C. The Phillips curve shown suggests that full employment

Which event probably contributed to the stagﬂation of the 1970s?

What are the major criticisms of the Laffer curve?

The short-run aggregate supply curve

Most economists think that

Refer to the graph. Stag?ation in the short run is best represented as resulting from a shift of

Refer to the graphs. An increase in an economy's labor productivity would shift curve

A senator states, "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this Policy would likely reply that

What is the long-run equilibrium in the extended aggregate demand and aggregate supply model?

The short-run aggregate supply curve is upsloping because higher price levels

Refer to the graph. If the economy is initially at equilibrium at the intersection of AD1 and AS1 and there is a tax cut, then, from a skeptical mainstream perspective, the immediate impact is that Aggregate

A rightward shift of the Phillips Curve suggests that

In the extended aggregate demand-aggregate supply model,

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

A rightward shift of the Phillips Curve suggests that a lower rate of unemployment is associated with each inﬂation rate.

In the short run, if the actual rate of inﬂation falls lower than the expected rate, then

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

Refer to the graph. What events would tend to temporarily move the economy from point B2 to C2B _ { 2 } \text { to } C _ { 2 }B2​ to C2​ ?

Refer to the graphs. Assume that the economy starts out at point D in Graph 2, whereas full employment would be attained at point C. The Phillips curve shown suggests that full employment

Which event probably contributed to the stagﬂation of the 1970s?

What are the major criticisms of the Laffer curve?

The short-run aggregate supply curve

Most economists think that

Refer to the graph. Stag?ation in the short run is best represented as resulting from a shift of

Refer to the graphs. An increase in an economy's labor productivity would shift curve

A senator states, "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this Policy would likely reply that

What is the long-run equilibrium in the extended aggregate demand and aggregate supply model?

The short-run aggregate supply curve is upsloping because higher price levels

Refer to the graph. If the economy is initially at equilibrium at the intersection of AD1 and AS1 and there is a tax cut, then, from a skeptical mainstream perspective, the immediate impact is that Aggregate

A rightward shift of the Phillips Curve suggests that

In the extended aggregate demand-aggregate supply model,

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

$Refer to the graph. What events would tend to temporarily move the economy from point B _ { 2 } \text { to } C _ { 2 } ?$ Refer to the graph. What events would tend to temporarily move the economy from point $B _ { 2 } \text { to } C _ { 2 }$ ?