Question 1

The automatic adjustment mechanism that makes the economy move toward the long-run Phillips Curve is

Accepted Answer

A)  expansionary ﬁscal or monetary policy. 
B)  inﬂation expectations and wage adjustments. 
C)  contractionary ﬁscal or monetary policy. 
D)  increases in productivity over time. 
A)  expansionary ﬁscal or monetary policy. 
B)  inﬂation expectations and wage adjustments. 
C)  contractionary ﬁscal or monetary policy. 
D)  increases in productivity over time.

Question 2

The graph describes the notion that as tax rates rise from zero percent, tax revenues will

Accepted Answer

A)  increase at ﬁrst, but then decline eventually as tax rates continue rising. 
B)  decrease at ﬁrst, but then increase eventually as tax rates continue rising. 
C)  rise higher and higher. 
D)  fall lower and lower until they shrink to zero. 
A)  increase at ﬁrst, but then decline eventually as tax rates continue rising. 
B)  decrease at ﬁrst, but then increase eventually as tax rates continue rising. 
C)  rise higher and higher. 
D)  fall lower and lower until they shrink to zero.

Question 3

Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by

Accepted Answer

A)  adverse shocks to aggregate supply. 
B)  adverse shocks to aggregate demand. 
C)  an increase in the misery index. 
D)  the Vietnam War. 
A)  adverse shocks to aggregate supply. 
B)  adverse shocks to aggregate demand. 
C)  an increase in the misery index. 
D)  the Vietnam War.

Question 4

Refer to the graph. If tax rates are between b and d, then supply-side economists are of the opinion that a(n)

Accepted Answer

A)  increase in tax revenues will increase tax rates. 
B)  decrease in tax rates will increase tax revenues. 
C)  increase in tax rates will increase tax revenues. 
D)  decrease in tax revenues will decrease tax rates. 
A)  increase in tax revenues will increase tax rates. 
B)  decrease in tax rates will increase tax revenues. 
C)  increase in tax rates will increase tax revenues. 
D)  decrease in tax revenues will decrease tax rates.

Question 5

The traditional Phillips Curve shows the

Accepted Answer

A)  direct correlation between the rate of inﬂation and the unemployment rate. 
B)  inverse correlation between the rate of inﬂation and the rate of unemployment. 
C)  direct correlation between the short-run and long-run aggregate supply. 
D)  inverse correlation between the short-run and long-run aggregate supply. 
A)  direct correlation between the rate of inﬂation and the unemployment rate. 
B)  inverse correlation between the rate of inﬂation and the rate of unemployment. 
C)  direct correlation between the short-run and long-run aggregate supply. 
D)  inverse correlation between the short-run and long-run aggregate supply.

Question 6

In the long run, if the price level increases, then nominal wages and other input prices will

Accepted Answer

A)  also rise, so ﬁrms will reduce their output level. 
B)  also rise, so ﬁrms will not change their output level. 
C)  not change, so ﬁrms will not change their output level. 
D)  decrease, so ﬁrms will increase their output level. 
A)  also rise, so ﬁrms will reduce their output level. 
B)  also rise, so ﬁrms will not change their output level. 
C)  not change, so ﬁrms will not change their output level. 
D)  decrease, so ﬁrms will increase their output level.

Question 7

Refer to the diagram. Point b would not be permanent because the

Accepted Answer

A)  economy would move from b to a on PC $\mathrm { PC } _ { 1 } .$ 
B)  short-run Phillips Curve would shift from PC $\mathrm { PC } _ { 1 } \text { to } \mathrm { PC } _ { 2 }$ and unemployment would increase to
The natural rate at c. 
C)  economy would immediately move from b to c to d. 
D)  economy would move from b directly to d. 
A)  economy would move from b to a on PC $\mathrm { PC } _ { 1 } .$ 
B)  short-run Phillips Curve would shift from PC $\mathrm { PC } _ { 1 } \text { to } \mathrm { PC } _ { 2 }$ and unemployment would increase to
The natural rate at c. 
C)  economy would immediately move from b to c to d. 
D)  economy would move from b directly to d.

Question 8

Refer to the graph. Suppose that the economy is at an initial equilibrium where the AD $A D _ { 1 } \text { and } A S _ { 1 }$ curves intersect. Demand-pull in?ation in the long run can best be illustrated as a shift of

Accepted Answer

A)  $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS }_2 \text {, and back again to } \mathrm { AS } _\text {1}.$ 
B)  $A D _ { 1 } \text { to } A D _ { 2 } \text {, and back again to } A D _ { 1 } \text {. }$ 
C)  $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 } \text {, consequently making } A D _ { 1 } \text { shift to } A D _ { 2 }$ 
D)  $\mathrm { AD } _ { 1 } \text { to } A \mathrm { D } _ { 2 } \text {, consequently making } \mathrm { AS } _ { 1 } \text { shift to } \mathrm { AS } _ { 2 } \text {. }$ 
A)  $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS }_2 \text {, and back again to } \mathrm { AS } _\text {1}.$ 
B)  $A D _ { 1 } \text { to } A D _ { 2 } \text {, and back again to } A D _ { 1 } \text {. }$ 
C)  $\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 } \text {, consequently making } A D _ { 1 } \text { shift to } A D _ { 2 }$ 
D)  $\mathrm { AD } _ { 1 } \text { to } A \mathrm { D } _ { 2 } \text {, consequently making } \mathrm { AS } _ { 1 } \text { shift to } \mathrm { AS } _ { 2 } \text {. }$

Question 9

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 10

In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive 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 11

According to the simple extended AD-AS model, if the economy is in a recession, prices and
nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that
real output returns to its full-employment level in the long run.

Accepted Answer

A) True 
 B)False

Question 12

(Last Word) Do tax increases reduce real GDP?

Accepted Answer

Yes, a study by Christina Romer and Davi

Question 13

Statistical data for the 1970s and 1980s suggest that

Accepted Answer

A)  the Phillips Curve was stable. 
B)  the Phillips Curve was unstable. 
C)  low levels of unemployment were consistently associated with high rates of inﬂation. 
D)  the inﬂation rate was highly stable. 
A)  the Phillips Curve was stable. 
B)  the Phillips Curve was unstable. 
C)  low levels of unemployment were consistently associated with high rates of inﬂation. 
D)  the inﬂation rate was highly stable.

Question 14

According to the simple extended AD-AS model, cost-push inﬂation does not last in the long run if
the government leaves the economy alone.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the graph. Assume the economy is at the initial position of $B _ { 2 }$ . It is possible for the
Government to reduce the unemployment rate and move the economy to C2 if

Accepted Answer

A)  expected in?ation remains at 4 percent. 
B)  expected in?ation becomes 8 percent. 
C)  actual in?ation remains at 4 percent. 
D)  actual in?ation is at 12 percent. 
A)  expected in?ation remains at 4 percent. 
B)  expected in?ation becomes 8 percent. 
C)  actual in?ation remains at 4 percent. 
D)  actual in?ation is at 12 percent.

Question 16

According to the simple extended AD-AS model, demand-pull inﬂation and cost-push inﬂation have
the same effect on output in the long run.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Demand-pull inﬂation and cost-push inﬂation are identical concepts because both involve lower
unemployment rates and rising prices.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the diagram for a speciﬁc economy. An increase in aggregate demand will

Accepted Answer

A)  shift this curve to the right. 
B)  shift this curve to the left. 
C)  move this economy down and to the right along the curve. 
D)  move this economy up and to the left along the curve. 
A)  shift this curve to the right. 
B)  shift this curve to the left. 
C)  move this economy down and to the right along the curve. 
D)  move this economy up and to the left along the curve.

Question 20

The short-run aggregate supply curve is vertical, and the long-run aggregate supply curve is
horizontal.

Accepted Answer

A) True 
 B)False

The automatic adjustment mechanism that makes the economy move toward the long-run Phillips Curve is

The graph describes the notion that as tax rates rise from zero percent, tax revenues will

Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by

Refer to the graph. If tax rates are between b and d, then supply-side economists are of the opinion that a(n)

The traditional Phillips Curve shows the

In the long run, if the price level increases, then nominal wages and other input prices will

Refer to the diagram. Point b would not be permanent because the

In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the

According to the simple extended AD-AS model, if the economy is in a recession, prices and nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that real output returns to its full-employment level in the long run.

(Last Word) Do tax increases reduce real GDP?

Statistical data for the 1970s and 1980s suggest that

According to the simple extended AD-AS model, cost-push inﬂation does not last in the long run if the government leaves the economy alone.

According to the simple extended AD-AS model, demand-pull inﬂation and cost-push inﬂation have the same effect on output in the long run.

Which of the following is a true statement?

Demand-pull inﬂation and cost-push inﬂation are identical concepts because both involve lower unemployment rates and rising prices.

Refer to the diagram for a speciﬁc economy. An increase in aggregate demand will

The short-run aggregate supply curve is vertical, and the long-run aggregate supply curve is horizontal.

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

The automatic adjustment mechanism that makes the economy move toward the long-run Phillips Curve is

The graph describes the notion that as tax rates rise from zero percent, tax revenues will

Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by

Refer to the graph. If tax rates are between b and d, then supply-side economists are of the opinion that a(n)

The traditional Phillips Curve shows the

In the long run, if the price level increases, then nominal wages and other input prices will

Refer to the diagram. Point b would not be permanent because the

Refer to the graph. Suppose that the economy is at an initial equilibrium where the AD AD1 and AS1A D _ { 1 } \text { and } A S _ { 1 }AD1​ and AS1​ curves intersect. Demand-pull in?ation in the long run can best be illustrated as a shift of

In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the

According to the simple extended AD-AS model, if the economy is in a recession, prices and nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that real output returns to its full-employment level in the long run.

(Last Word) Do tax increases reduce real GDP?

Statistical data for the 1970s and 1980s suggest that

According to the simple extended AD-AS model, cost-push inﬂation does not last in the long run if the government leaves the economy alone.

Refer to the graph. Assume the economy is at the initial position of B2B _ { 2 }B2​ . It is possible for the Government to reduce the unemployment rate and move the economy to C2 if

According to the simple extended AD-AS model, demand-pull inﬂation and cost-push inﬂation have the same effect on output in the long run.

Which of the following is a true statement?

Demand-pull inﬂation and cost-push inﬂation are identical concepts because both involve lower unemployment rates and rising prices.

Refer to the diagram for a speciﬁc economy. An increase in aggregate demand will

The short-run aggregate supply curve is vertical, and the long-run aggregate supply curve is horizontal.

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