Question 1

An increase in the federal minimum wage will shift the long-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 2

The figure below shows the short-run aggregate demand and supply curves of an economy. If the economy is currently producing at Y2, long-run equilibrium will most likely be established by a(n):

Accepted Answer

A)  increase in short-run aggregate supply. 
B)  decrease in short-run aggregate supply. 
C)  decrease in potential output. 
D)  increase in potential output. 
E)  rightward shift of the aggregate demand curve. 
A)  increase in short-run aggregate supply. 
B)  decrease in short-run aggregate supply. 
C)  decrease in potential output. 
D)  increase in potential output. 
E)  rightward shift of the aggregate demand curve.

Question 3

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?

Accepted Answer

A)  Output decreases, and the price level increases. 
B)  Inflation decreases, and unemployment rises. 
C)  Both the equilibrium output and the price level increase. 
D)  Both the equilibrium output and the price level decrease. 
E)  Inflation rises, and unemployment decreases 
A)  Output decreases, and the price level increases. 
B)  Inflation decreases, and unemployment rises. 
C)  Both the equilibrium output and the price level increase. 
D)  Both the equilibrium output and the price level decrease. 
E)  Inflation rises, and unemployment decreases

Question 4

The figure below shows the short-run aggregate demand and supply curves of an economy. In this figure, the distance between Y1 and Y2 represents:

Accepted Answer

A)  an expansionary gap. 
B)  a recessionary gap. 
C)  a cost-push inflation. 
D)  the natural rate of unemployment. 
E)  the full employment output. 
A)  an expansionary gap. 
B)  a recessionary gap. 
C)  a cost-push inflation. 
D)  the natural rate of unemployment. 
E)  the full employment output.

Question 5

The more the short-run output exceeds an economy's potential, _____.

Accepted Answer

A)  the smaller the expansionary gap 
B)  the greater the upward pressure on the price level 
C)  the larger the recessionary gap 
D)  the greater the downward pressure on the price level 
E)  the lesser the demand for resources 
A)  the smaller the expansionary gap 
B)  the greater the upward pressure on the price level 
C)  the larger the recessionary gap 
D)  the greater the downward pressure on the price level 
E)  the lesser the demand for resources

Question 6

The potential output of an economy is the level of output produced when the:

Accepted Answer

A)  real wage equals the nominal wage. 
B)  price level is constant. 
C)  expected real wage equals the nominal wage. 
D)  seasonal unemployment rate is zero. 
E)  expected price level equals the actual price level. 
A)  real wage equals the nominal wage. 
B)  price level is constant. 
C)  expected real wage equals the nominal wage. 
D)  seasonal unemployment rate is zero. 
E)  expected price level equals the actual price level.

Question 7

The capital stock of an economy increases:

Accepted Answer

A)  whenever money in circulation is decreased. 
B)  whenever gross investment is positive. 
C)  whenever gross investment is negative. 
D)  only if net investment is positive. 
E)  only if gross investment is zero. 
A)  whenever money in circulation is decreased. 
B)  whenever gross investment is positive. 
C)  whenever gross investment is negative. 
D)  only if net investment is positive. 
E)  only if gross investment is zero.

Question 8

Which of these is not assumed to be constant along a short-run aggregate supply curve?

Accepted Answer

A)  The actual price level 
B)  The state of technology 
C)  The size and quality of the labor force 
D)  The expected price level 
E)  The size and quality of the capital stock 
A)  The actual price level 
B)  The state of technology 
C)  The size and quality of the labor force 
D)  The expected price level 
E)  The size and quality of the capital stock

Question 9

Which of the following is true when an economy is in long-run equilibrium?

Accepted Answer

A)  Actual output can exceed potential output. 
B)  Potential output can exceed actual output. 
C)  Actual output must equal potential output. 
D)  Real GDP must equal nominal GDP. 
E)  Expected price level can exceed actual price level. 
A)  Actual output can exceed potential output. 
B)  Potential output can exceed actual output. 
C)  Actual output must equal potential output. 
D)  Real GDP must equal nominal GDP. 
E)  Expected price level can exceed actual price level.

Question 10

The potential output of an economy is:

Accepted Answer

A)  the output level at which inflation is very high. 
B)  the output level at which nominal GDP is equal to real GDP. 
C)  less than the full-employment rate of output. 
D)  the output level at which total unemployment is zero. 
E)  also referred to as the natural rate of output. 
A)  the output level at which inflation is very high. 
B)  the output level at which nominal GDP is equal to real GDP. 
C)  less than the full-employment rate of output. 
D)  the output level at which total unemployment is zero. 
E)  also referred to as the natural rate of output.

Question 11

When the actual price level in an economy turns out to be lower than that expected in the short run, _____.

Accepted Answer

A)  businesses cut back production 
B)  the potential output level decreases 
C)  the aggregate supply curve shifts leftward 
D)  the aggregate supply curve shifts rightward 
E)  an expansionary gap develops 
A)  businesses cut back production 
B)  the potential output level decreases 
C)  the aggregate supply curve shifts leftward 
D)  the aggregate supply curve shifts rightward 
E)  an expansionary gap develops

Question 12

Floods in the Midwest that diminish farm output would shift the aggregate supply curve outward.

Accepted Answer

A) True 
 B)False

Question 13

The real wage is equal to the:

Accepted Answer

A)  wage measured in terms of the quantity of goods and services it buys. 
B)  wage measured in terms of the dollar value of the goods and services it buys. 
C)  nominal wage net of taxes paid on wages. 
D)  non-wage benefits received by workers. 
E)  product of the nominal wage and the price level. 
A)  wage measured in terms of the quantity of goods and services it buys. 
B)  wage measured in terms of the dollar value of the goods and services it buys. 
C)  nominal wage net of taxes paid on wages. 
D)  non-wage benefits received by workers. 
E)  product of the nominal wage and the price level.

Question 14

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year, which of the following is correct?

Accepted Answer

A)  Real wages will increase by 2 percent per year. 
B)  Real wages will increase by 3 percent per year. 
C)  Real wages will decrease by 3 percent per year. 
D)  Real wages will decrease by 2 percent per year. 
E)  Real wages will remain constant. 
A)  Real wages will increase by 2 percent per year. 
B)  Real wages will increase by 3 percent per year. 
C)  Real wages will decrease by 3 percent per year. 
D)  Real wages will decrease by 2 percent per year. 
E)  Real wages will remain constant.

Question 15

Which of these is most likely to shift the long-run aggregate supply curve to the left?

Accepted Answer

A)  An increase in the average workweek 
B)  An improvement in technology 
C)  A civil war 
D)  A decrease in aggregate demand 
E)  A decline in global oil prices 
A)  An increase in the average workweek 
B)  An improvement in technology 
C)  A civil war 
D)  A decrease in aggregate demand 
E)  A decline in global oil prices

Question 16

If the price level in an economy turns out to be higher than that expected by workers and firms, _____.

Accepted Answer

A)  businesses increase production. 
B)  the economy's potential output level increases. 
C)  the economy's short-run aggregate supply curve shifts rightward. 
D)  the economy's short-run aggregate supply curve shifts leftward. 
E)  a recessionary gap develops. 
A)  businesses increase production. 
B)  the economy's potential output level increases. 
C)  the economy's short-run aggregate supply curve shifts rightward. 
D)  the economy's short-run aggregate supply curve shifts leftward. 
E)  a recessionary gap develops.

Question 17

Suppose Jack's salary increased from $100,000 to $200,000 per year between 2004 and 2014 and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?

Accepted Answer

A)  His real income and money income have both increased. 
B)  His real income has increased and money income has decreased. 
C)  His real income and money income have both decreased. 
D)  His real income has decreased and money income has increased. 
E)  His real income has remained unchanged. 
A)  His real income and money income have both increased. 
B)  His real income has increased and money income has decreased. 
C)  His real income and money income have both decreased. 
D)  His real income has decreased and money income has increased. 
E)  His real income has remained unchanged.

Question 18

For the aggregate demand and aggregate supply listed in schedule #2 of the table given below, the equilibrium output level and price level are:

Accepted Answer

A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively. 
A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively.

Question 19

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. The change in real GDP in this figure from Y1 to Y2 could have been caused by:

Accepted Answer

A)  a government policy aimed at increasing demand. 
B)  a change in weather conditions that led to worldwide crop failures. 
C)  an attempt by key resource producers to monopolize supply. 
D)  an increase in taxation or a decrease in government spending. 
E)  an increase in labor productivity. 
A)  a government policy aimed at increasing demand. 
B)  a change in weather conditions that led to worldwide crop failures. 
C)  an attempt by key resource producers to monopolize supply. 
D)  an increase in taxation or a decrease in government spending. 
E)  an increase in labor productivity.

Question 20

If the rate of increase in the price level exceeds the rate of increase in nominal GDP, real GDP declines.

Accepted Answer

A) True 
 B)False

An increase in the federal minimum wage will shift the long-run aggregate supply curve to the left.

The figure below shows the short-run aggregate demand and supply curves of an economy. If the economy is currently producing at Y₂, long-run equilibrium will most likely be established by a(n):

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?

The figure below shows the short-run aggregate demand and supply curves of an economy. In this figure, the distance between Y₁ and Y₂ represents:

The more the short-run output exceeds an economy's potential, _____.

The potential output of an economy is the level of output produced when the:

The capital stock of an economy increases:

Which of these is not assumed to be constant along a short-run aggregate supply curve?

Which of the following is true when an economy is in long-run equilibrium?

The potential output of an economy is:

When the actual price level in an economy turns out to be lower than that expected in the short run, _____.

Floods in the Midwest that diminish farm output would shift the aggregate supply curve outward.

The real wage is equal to the:

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year, which of the following is correct?

Which of these is most likely to shift the long-run aggregate supply curve to the left?

If the price level in an economy turns out to be higher than that expected by workers and firms, _____.

Suppose Jack's salary increased from $100,000 to $200,000 per year between 2004 and 2014 and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?

For the aggregate demand and aggregate supply listed in schedule #2 of the table given below, the equilibrium output level and price level are:

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. The change in real GDP in this figure from Y₁ to Y₂ could have been caused by:

If the rate of increase in the price level exceeds the rate of increase in nominal GDP, real GDP declines.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 10: Aggregate Supply

An increase in the federal minimum wage will shift the long-run aggregate supply curve to the left.

The figure below shows the short-run aggregate demand and supply curves of an economy. If the economy is currently producing at Y2, long-run equilibrium will most likely be established by a(n):

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?

The figure below shows the short-run aggregate demand and supply curves of an economy. In this figure, the distance between Y1 and Y2 represents:

The more the short-run output exceeds an economy's potential, _____.

The potential output of an economy is the level of output produced when the:

The capital stock of an economy increases:

Which of these is not assumed to be constant along a short-run aggregate supply curve?

Which of the following is true when an economy is in long-run equilibrium?

The potential output of an economy is:

When the actual price level in an economy turns out to be lower than that expected in the short run, _____.

Floods in the Midwest that diminish farm output would shift the aggregate supply curve outward.

The real wage is equal to the:

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year, which of the following is correct?

Which of these is most likely to shift the long-run aggregate supply curve to the left?

If the price level in an economy turns out to be higher than that expected by workers and firms, _____.

Suppose Jack's salary increased from $100,000 to $200,000 per year between 2004 and 2014 and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?

For the aggregate demand and aggregate supply listed in schedule #2 of the table given below, the equilibrium output level and price level are:

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. The change in real GDP in this figure from Y1 to Y2 could have been caused by:

If the rate of increase in the price level exceeds the rate of increase in nominal GDP, real GDP declines.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

The figure below shows the short-run aggregate demand and supply curves of an economy. If the economy is currently producing at Y₂, long-run equilibrium will most likely be established by a(n):

The figure below shows the short-run aggregate demand and supply curves of an economy. In this figure, the distance between Y₁ and Y₂ represents:

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. The change in real GDP in this figure from Y₁ to Y₂ could have been caused by: