Question 1

The economy enters the long-run once

Accepted Answer

A)  nominal wages become equal to real wages. 
B)  real wages become equal to nominal wages. 
C)  suﬃcient time has elapsed for wage contracts to expire and nominal wages to adjust to output-price changes. 
D)  suﬃcient time has elapsed for real GDP to increase and unemployment to decrease as a consequence 
A)  nominal wages become equal to real wages. 
B)  real wages become equal to nominal wages. 
C)  suﬃcient time has elapsed for wage contracts to expire and nominal wages to adjust to output-price changes. 
D)  suﬃcient time has elapsed for real GDP to increase and unemployment to decrease as a consequence

Question 2

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 short 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 c to d. 
C)  a change of aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } A S _ { 3 } \text {. }$ 
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 c to d. 
C)  a change of aggregate supply from A $\mathrm { AS } _ { 2 } \text { to } A S _ { 3 } \text {. }$ 
D)  a move from b to d.

Question 3

Equilibrium in the long run occurs when

Accepted Answer

A)  AD intersects the short-run AS, regardless of output level. 
B)  AD intersects the short-run AS, regardless of price level. 
C)  AD intersects the short-run and the long-run AS curves at the same point. 
D)  the short-run AS curve intersects the long-run AS curve. 
A)  AD intersects the short-run AS, regardless of output level. 
B)  AD intersects the short-run AS, regardless of price level. 
C)  AD intersects the short-run and the long-run AS curves at the same point. 
D)  the short-run AS curve intersects the long-run AS curve.

Question 4

Refer to the diagram and assume the economy is initially at point $b _ { 1 }$ . Which of the following
Movements is consistent with the traditional Phillips Curve?

Accepted Answer

A)  the movement from $b _ { 1 } \text { to } b _ { 2 }$ 
B)  the movement from $b _ { 1 } \text { to } c _ { 1 }$ 
C)  the movement from $c _ { 1 } \text { to } b _ { 2 }$ 
D)  the movement from $b _ { 2 } \text { to } b _ { 1 }$ 
A)  the movement from $b _ { 1 } \text { to } b _ { 2 }$ 
B)  the movement from $b _ { 1 } \text { to } c _ { 1 }$ 
C)  the movement from $c _ { 1 } \text { to } b _ { 2 }$ 
D)  the movement from $b _ { 2 } \text { to } b _ { 1 }$

Question 5

If government uses ﬁscal policy to restrain cost-push inﬂation, we can expect

Accepted Answer

A)  the inﬂation rate to rise. 
B)  the unemployment rate to fall. 
C)  the aggregate demand curve to shift rightward. 
D)  tax-rate declines and increases in government spending. 
A)  the inﬂation rate to rise. 
B)  the unemployment rate to fall. 
C)  the aggregate demand curve to shift rightward. 
D)  tax-rate declines and increases in government spending.

Question 6

Refer to the diagram. The natural rate of unemployment for this economy is

Accepted Answer

A)  3 percent. 
B)  5 percent. 
C)  6 percent. 
D)  9 percent. 
A)  3 percent. 
B)  5 percent. 
C)  6 percent. 
D)  9 percent.

Question 7

The traditional Phillips Curve suggests a trade-off between

Accepted Answer

A)  price stability and income equality. 
B)  the level of unemployment and inﬂation. 
C)  unemployment and income equality. 
D)  economic growth and full employment. 
A)  price stability and income equality. 
B)  the level of unemployment and inﬂation. 
C)  unemployment and income equality. 
D)  economic growth and full employment.

Question 8

Refer to the Laffer Curve. A cut in the tax rate from T $T _ { 2 } \text { to } T _ { 1 }$ would

Accepted Answer

A)  decrease tax revenues and support the views of supply-side economists. 
B)  increase tax revenues and support the views of supply-side economists. 
C)  increase tax revenues and support the views of mainstream economists. 
D)  decrease tax revenues and support the views of mainstream economists. 
A)  decrease tax revenues and support the views of supply-side economists. 
B)  increase tax revenues and support the views of supply-side economists. 
C)  increase tax revenues and support the views of mainstream economists. 
D)  decrease tax revenues and support the views of mainstream economists.

Question 9

Refer to the graphs, where the subscripts on the labels denote years 1 and 2. From the graphs we can clearly conclude that the economy

Accepted Answer

A)  is not at full employment in either year. 
B)  is at full employment in year 1 but not in year 2. 
C)  is at full employment in year 2 but not in year 1. 
D)  is at full employment in both years. 
A)  is not at full employment in either year. 
B)  is at full employment in year 1 but not in year 2. 
C)  is at full employment in year 2 but not in year 1. 
D)  is at full employment in both years.

Question 10

What is supply-side economics?

Accepted Answer

Supply-side economics is a vie

Question 11

Accepted Answer

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

Question 12

Inﬂation in the U.S. economy tends to be

Accepted Answer

A)  a ﬁnite, one-time event resulting from a shock. 
B)  ongoing, as increases in aggregate demand generally exceed the increases in aggregate supply. 
C)  a ﬁnite, one-time event, as the Fed actively works to eliminate all inﬂation. 
D)  ongoing, as aggregate supply is continually shifting to the left. 
A)  a ﬁnite, one-time event resulting from a shock. 
B)  ongoing, as increases in aggregate demand generally exceed the increases in aggregate supply. 
C)  a ﬁnite, one-time event, as the Fed actively works to eliminate all inﬂation. 
D)  ongoing, as aggregate supply is continually shifting to the left.

Question 13

Accepted Answer

A)  a movement from $x _ { 1 }$ to $x _ { 2 }$ in the short run, and the unemployment rate decreases, followed by a shift from $x _ { 2 }$ to $y _ { 1 }$ as nominal wages rise in the long run. 
B)  a movement from $x _ { 1 }$ to $x _ { 3 }$ in the short run, and the unemployment rate decreases, followed by a shift from $x _ { 3 }$ to $x _ { 1 }$ as output rises in the long run. 
C)  $$\text { a movement from } x _ { 1 } \text { to } y _ { 1 } \text { in the short run and back to } x _ { 1 } \text { in the long run. }$$ 
D)  $$\text { no change in the short run, but a shift from } x _ { 1 } \text { to } y _ { 1 } \text { in the long run. }$$ 
A)  a movement from $x _ { 1 }$ to $x _ { 2 }$ in the short run, and the unemployment rate decreases, followed by a shift from $x _ { 2 }$ to $y _ { 1 }$ as nominal wages rise in the long run. 
B)  a movement from $x _ { 1 }$ to $x _ { 3 }$ in the short run, and the unemployment rate decreases, followed by a shift from $x _ { 3 }$ to $x _ { 1 }$ as output rises in the long run. 
C)  $$\text { a movement from } x _ { 1 } \text { to } y _ { 1 } \text { in the short run and back to } x _ { 1 } \text { in the long run. }$$ 
D)  $$\text { no change in the short run, but a shift from } x _ { 1 } \text { to } y _ { 1 } \text { in the long run. }$$

Question 14

In an aggregate demand-aggregate supply framework, ﬁscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a

Accepted Answer

A)  rightward shift of the aggregate demand curve. 
B)  leftward shift of the aggregate demand curve. 
C)  rightward shift of the long-run aggregate supply curve. 
D)  leftward shift of the long-run aggregate supply curve. 
A)  rightward shift of the aggregate demand curve. 
B)  leftward shift of the aggregate demand curve. 
C)  rightward shift of the long-run aggregate supply curve. 
D)  leftward shift of the long-run aggregate supply curve.

Question 15

Refer to the graph. Economic growth driven by productivity and technology would be illustrated as a shift of

Accepted Answer

A)  $A D _ { 1 } \text { to } A D _ { 2 }$ 
B)  $P _ { 1 } \text { to } P _ { 2 }$ 
C)  $\mathrm { AS } _ { 2 } \text { to }  \mathrm { AS } _ { 1 }$ 
D)  $\mathrm { AS } _ { \mathrm { LR } 1 } \text { to } \mathrm { AS } _ { \mathrm { LR } 2 }$ 
A)  $A D _ { 1 } \text { to } A D _ { 2 }$ 
B)  $P _ { 1 } \text { to } P _ { 2 }$ 
C)  $\mathrm { AS } _ { 2 } \text { to }  \mathrm { AS } _ { 1 }$ 
D)  $\mathrm { AS } _ { \mathrm { LR } 1 } \text { to } \mathrm { AS } _ { \mathrm { LR } 2 }$

Question 16

Accepted Answer

A)  a decrease in proﬁts, an increase in real output, and a decrease in the unemployment rate. 
B)  a decrease in proﬁts, a decrease in real output, and a decrease in the unemployment rate. 
C)  a decrease in proﬁts, a decrease in real output, and an increase in the unemployment rate. 
D)  an increase in proﬁts, an increase in real output, and a decrease in the unemployment rate. 
A)  a decrease in proﬁts, an increase in real output, and a decrease in the unemployment rate. 
B)  a decrease in proﬁts, a decrease in real output, and a decrease in the unemployment rate. 
C)  a decrease in proﬁts, a decrease in real output, and an increase in the unemployment rate. 
D)  an increase in proﬁts, an increase in real output, and a decrease in the unemployment rate.

Question 17

Government can push the unemployment rate below the natural rate only by

Accepted Answer

A)  instituting supply-side economic policies. 
B)  producing a higher rate of inﬂation than people expect. 
C)  balancing the federal budget. 
D)  achieving zero inﬂation. 
A)  instituting supply-side economic policies. 
B)  producing a higher rate of inﬂation than people expect. 
C)  balancing the federal budget. 
D)  achieving zero inﬂation.

Question 18

A stable Phillips curve does not allow for the possibility of stagﬂation.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the graph. Critics of supply-side economics would argue that tax rates are currently between

Accepted Answer

A)  b and d and that a decrease in tax rates will decrease tax revenues. 
B)  0 and b and that a decrease in tax rates will decrease tax revenues. 
C)  0 and b and that a decrease in tax rates will increase tax revenues. 
D)  b and d and that a decrease in tax rates will increase tax revenues. 
A)  b and d and that a decrease in tax rates will decrease tax revenues. 
B)  0 and b and that a decrease in tax rates will decrease tax revenues. 
C)  0 and b and that a decrease in tax rates will increase tax revenues. 
D)  b and d and that a decrease in tax rates will increase tax revenues.

Question 20

Refer to the graphs. Growth of production capacity is shown by

Accepted Answer

A)  the shift from AB to CD only. 
B)  the shift from X to Y only. 
C)  both the shift from AB to CD and the shift from X to Y. 
D)  both the shift from AB to CD and the shift from Y to X. 
A)  the shift from AB to CD only. 
B)  the shift from X to Y only. 
C)  both the shift from AB to CD and the shift from X to Y. 
D)  both the shift from AB to CD and the shift from Y to X.

The economy enters the long-run once

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 short run, demand-pull inflation could best be shown as

Equilibrium in the long run occurs when

If government uses ﬁscal policy to restrain cost-push inﬂation, we can expect

Refer to the diagram. The natural rate of unemployment for this economy is

The traditional Phillips Curve suggests a trade-off between

$Refer to the Laffer Curve. A cut in the tax rate from T T _ { 2 } \text { to } T _ { 1 } would$ Refer to the Laffer Curve. A cut in the tax rate from T $T _ { 2 } \text { to } T _ { 1 }$ would

Refer to the graphs, where the subscripts on the labels denote years 1 and 2. From the graphs we can clearly conclude that the economy

What is supply-side economics?

Inﬂation in the U.S. economy tends to be

In an aggregate demand-aggregate supply framework, ﬁscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a

Refer to the graph. Economic growth driven by productivity and technology would be illustrated as a shift of

Government can push the unemployment rate below the natural rate only by

A stable Phillips curve does not allow for the possibility of stagﬂation.

Refer to the graph. Critics of supply-side economics would argue that tax rates are currently between

Refer to the graphs. Growth of production capacity is shown by

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

The economy enters the long-run once

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 short run, demand-pull inflation could best be shown as

Equilibrium in the long run occurs when

Refer to the diagram and assume the economy is initially at point b1b _ { 1 }b1​ . Which of the following Movements is consistent with the traditional Phillips Curve?

If government uses ﬁscal policy to restrain cost-push inﬂation, we can expect

Refer to the diagram. The natural rate of unemployment for this economy is

The traditional Phillips Curve suggests a trade-off between

Refer to the Laffer Curve. A cut in the tax rate from T T2 to T1T _ { 2 } \text { to } T _ { 1 }T2​ to T1​ would

Refer to the graphs, where the subscripts on the labels denote years 1 and 2. From the graphs we can clearly conclude that the economy

What is supply-side economics?

Inﬂation in the U.S. economy tends to be

In an aggregate demand-aggregate supply framework, ﬁscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a

Refer to the graph. Economic growth driven by productivity and technology would be illustrated as a shift of

Government can push the unemployment rate below the natural rate only by

A stable Phillips curve does not allow for the possibility of stagﬂation.

Refer to the graph. Critics of supply-side economics would argue that tax rates are currently between

Refer to the graphs. Growth of production capacity is shown by

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 short run, demand-pull inflation could best be shown as

$Refer to the Laffer Curve. A cut in the tax rate from T T _ { 2 } \text { to } T _ { 1 } would$ Refer to the Laffer Curve. A cut in the tax rate from T $T _ { 2 } \text { to } T _ { 1 }$ would