Question 1

Which of the following is generally true of nominal wages?

Accepted Answer

A)  In the long run, nominal wages tend to equal real wages. 
B)  Nominal wages are more flexible downward than upward. 
C)  Nominal wages are more flexible than prices. 
D)  Nominal wages tend to adjust slowly in the downward direction. 
E)  Nominal wages do not rise during labor shortages. 
A)  In the long run, nominal wages tend to equal real wages. 
B)  Nominal wages are more flexible downward than upward. 
C)  Nominal wages are more flexible than prices. 
D)  Nominal wages tend to adjust slowly in the downward direction. 
E)  Nominal wages do not rise during labor shortages.

Question 2

An adverse supply shock would shift:

Accepted Answer

A)  only the short-run aggregate supply curve outward. 
B)  only the long-run aggregate supply curve outward. 
C)  only the long-run aggregate supply curve inward. 
D)  only the short-run aggregate supply curve inward. 
E)  both the long-run and the short-run aggregate supply curves inward. 
A)  only the short-run aggregate supply curve outward. 
B)  only the long-run aggregate supply curve outward. 
C)  only the long-run aggregate supply curve inward. 
D)  only the short-run aggregate supply curve inward. 
E)  both the long-run and the short-run aggregate supply curves inward.

Question 3

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year, real wages will:

Accepted Answer

A)  increase by 3 percent per year. 
B)  increase by 5 percent per year. 
C)  increase by 2 percent per year. 
D)  decrease by 5 percent per year. 
E)  decrease by 3 percent per year. 
A)  increase by 3 percent per year. 
B)  increase by 5 percent per year. 
C)  increase by 2 percent per year. 
D)  decrease by 5 percent per year. 
E)  decrease by 3 percent per year.

Question 4

Suppose the price level increases by 5 percent and the nominal wages of workers increase by 3 percent during a particular year. This implies that the real wage has:

Accepted Answer

A)  declined by 2 percent. 
B)  declined by 8 percent. 
C)  also increased by 2 percent. 
D)  also increased by 8 percent. 
E)  remained constant. 
A)  declined by 2 percent. 
B)  declined by 8 percent. 
C)  also increased by 2 percent. 
D)  also increased by 8 percent. 
E)  remained constant.

Question 5

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. Which of the following is indicated by the arrow given in this figure?

Accepted Answer

A)  A decrease in capital stock 
B)  An increase in long-run aggregate supply 
C)  An increase in nominal wage 
D)  A decrease in long-run aggregate supply 
E)  A decrease in the aggregate quantity demanded 
A)  A decrease in capital stock 
B)  An increase in long-run aggregate supply 
C)  An increase in nominal wage 
D)  A decrease in long-run aggregate supply 
E)  A decrease in the aggregate quantity demanded

Question 6

When the economy is at its potential output level, which of the following is true?

Accepted Answer

A)  The price level is higher than that expected by workers. 
B)  The nominal wage is equal to the real wage. 
C)  The unemployment rate is about 14 percent. 
D)  The economy is producing its maximum sustainable output. 
E)  The actual price level is less than the expected price level. 
A)  The price level is higher than that expected by workers. 
B)  The nominal wage is equal to the real wage. 
C)  The unemployment rate is about 14 percent. 
D)  The economy is producing its maximum sustainable output. 
E)  The actual price level is less than the expected price level.

Question 7

The figure below shows the equilibrium in an aggregate demand-aggregate supply model. In this figure, which of the following is true for an economy that is at point V in the short run?

Accepted Answer

A)  There is a recessionary gap worth $200 billion. 
B)  The potential output is $7 trillion. 
C)  The actual price level is 100. 
D)  The natural rate of unemployment is more than 6.8 trillion. 
E)  The actual output is equal to the potential output. 
A)  There is a recessionary gap worth $200 billion. 
B)  The potential output is $7 trillion. 
C)  The actual price level is 100. 
D)  The natural rate of unemployment is more than 6.8 trillion. 
E)  The actual output is equal to the potential output.

Question 8

Potential output depends on all of the following except one. Which is the exception?

Accepted Answer

A)  The supply of labor 
B)  Labor productivity 
C)  Household choices regarding labor and leisure 
D)  The technology in current use 
E)  The number of consumers in the market 
A)  The supply of labor 
B)  Labor productivity 
C)  Household choices regarding labor and leisure 
D)  The technology in current use 
E)  The number of consumers in the market

Question 9

The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y1 level of output, _____.

Accepted Answer

A)  potential output is less than actual output. 
B)  there is zero unemployment. 
C)  the price level will rise eventually. 
D)  aggregate supply will fall to restore equilibrium. 
E)  the actual unemployment rate is more than the natural rate. 
A)  potential output is less than actual output. 
B)  there is zero unemployment. 
C)  the price level will rise eventually. 
D)  aggregate supply will fall to restore equilibrium. 
E)  the actual unemployment rate is more than the natural rate.

Question 10

Given the aggregate demand curve, an increase in the supply of a productive resource will:

Accepted Answer

A)  increase output but leave prices unchanged. 
B)  decrease both output and prices. 
C)  increase the price level and decrease output. 
D)  decrease the price level and increase output. 
E)  increase the price level but leave output unchanged. 
A)  increase output but leave prices unchanged. 
B)  decrease both output and prices. 
C)  increase the price level and decrease output. 
D)  decrease the price level and increase output. 
E)  increase the price level but leave output unchanged.

Question 11

Which of the following supply shocks would shift the aggregate supply curve inward?

Accepted Answer

A)  A decrease in business taxes 
B)  A decrease in gasoline taxes 
C)  A decrease in the cost of raw materials 
D)  A decrease in agricultural output 
E)  A decrease in the amount and cost of government regulation 
A)  A decrease in business taxes 
B)  A decrease in gasoline taxes 
C)  A decrease in the cost of raw materials 
D)  A decrease in agricultural output 
E)  A decrease in the amount and cost of government regulation

Question 12

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on:

Accepted Answer

A)  how quickly planned investment spending adjusts to changes in population growth. 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages. 
C)  how quickly technology changes to increase aggregate supply. 
D)  whether the economy is experiencing a recessionary gap or an expansionary gap. 
E)  how quickly real wages adjust to restore full employment in the labor market. 
A)  how quickly planned investment spending adjusts to changes in population growth. 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages. 
C)  how quickly technology changes to increase aggregate supply. 
D)  whether the economy is experiencing a recessionary gap or an expansionary gap. 
E)  how quickly real wages adjust to restore full employment in the labor market.

Question 13

If the actual price level is higher than the expected price level, the economy will:

Accepted Answer

A)  have no structural unemployment. 
B)  experience a recession. 
C)  experience stagflation. 
D)  expand output in the short run. 
E)  have no seasonal unemployment. 
A)  have no structural unemployment. 
B)  experience a recession. 
C)  experience stagflation. 
D)  expand output in the short run. 
E)  have no seasonal unemployment.

Question 14

Which of these is most likely to reduce the potential output of an economy?

Accepted Answer

A)  An increase in the size of the labor force 
B)  A deterioration in the quality of the labor force 
C)  A decrease in the cost of using computers 
D)  A decrease in the price level 
E)  An increase in the price level 
A)  An increase in the size of the labor force 
B)  A deterioration in the quality of the labor force 
C)  A decrease in the cost of using computers 
D)  A decrease in the price level 
E)  An increase in the price level

Question 15

If resource prices are "sticky" downward and a recessionary gap develops, the short-run aggregate supply curve will:

Accepted Answer

A)  shift leftward to return the economy to its potential output. 
B)  shift rightward to return the economy to its potential output. 
C)  become a horizontal straight line. 
D)  not shift rightward to return the economy to its potential output. 
E)  become the long-run aggregate supply curve. 
A)  shift leftward to return the economy to its potential output. 
B)  shift rightward to return the economy to its potential output. 
C)  become a horizontal straight line. 
D)  not shift rightward to return the economy to its potential output. 
E)  become the long-run aggregate supply curve.

Question 16

In the figure given below, when aggregate supply is AS, the equilibrium output and price level will be Y2 and P2.

Accepted Answer

A) True 
 B)False

Question 17

When resource prices are negotiable, the long-run aggregate supply curve is represented by:

Accepted Answer

A)  an upward-sloping line 
B)  a downward-sloping line 
C)  a vertical line at potential output. 
D)  a horizontal line at the actual price level. 
E)  a horizontal line at the expected price level. 
A)  an upward-sloping line 
B)  a downward-sloping line 
C)  a vertical line at potential output. 
D)  a horizontal line at the actual price level. 
E)  a horizontal line at the expected price level.

Question 18

Which of the following is most likely to shift the potential output of an economy to the right?

Accepted Answer

A)  A decline in the length of the average workweek 
B)  An increase in the supply of educated and skilled workers 
C)  A drought 
D)  An increase in aggregate demand 
E)  An increase in the minimum wage received by workers 
A)  A decline in the length of the average workweek 
B)  An increase in the supply of educated and skilled workers 
C)  A drought 
D)  An increase in aggregate demand 
E)  An increase in the minimum wage received by workers

Question 19

Which of the following is true of a beneficial supply shock?

Accepted Answer

A)  It can lead to a temporary lower price level. 
B)  It can create a recessionary gap. 
C)  It can permanently decrease the economy's price level. 
D)  It can shift the aggregate demand curve rightward. 
E)  It can shift the aggregate demand curve leftward. 
A)  It can lead to a temporary lower price level. 
B)  It can create a recessionary gap. 
C)  It can permanently decrease the economy's price level. 
D)  It can shift the aggregate demand curve rightward. 
E)  It can shift the aggregate demand curve leftward.

Question 20

The slope of the short-run aggregate supply curve depends on how sharply:

Accepted Answer

A)  the marginal cost of production rises as real GDP expands. 
B)  the average cost of production rises as real GDP expands. 
C)  real GDP increases as the price level rises. 
D)  nominal GDP increases as the price level rises. 
E)  product prices change as the price level rises. 
A)  the marginal cost of production rises as real GDP expands. 
B)  the average cost of production rises as real GDP expands. 
C)  real GDP increases as the price level rises. 
D)  nominal GDP increases as the price level rises. 
E)  product prices change as the price level rises.

Which of the following is generally true of nominal wages?

An adverse supply shock would shift:

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year, real wages will:

Suppose the price level increases by 5 percent and the nominal wages of workers increase by 3 percent during a particular year. This implies that the real wage has:

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. Which of the following is indicated by the arrow given in this figure?

When the economy is at its potential output level, which of the following is true?

The figure below shows the equilibrium in an aggregate demand-aggregate supply model. In this figure, which of the following is true for an economy that is at point V in the short run?

Potential output depends on all of the following except one. Which is the exception?

The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y₁ level of output, _____.

Given the aggregate demand curve, an increase in the supply of a productive resource will:

Which of the following supply shocks would shift the aggregate supply curve inward?

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on:

If the actual price level is higher than the expected price level, the economy will:

Which of these is most likely to reduce the potential output of an economy?

If resource prices are "sticky" downward and a recessionary gap develops, the short-run aggregate supply curve will:

In the figure given below, when aggregate supply is AS, the equilibrium output and price level will be Y₂ and P₂.

When resource prices are negotiable, the long-run aggregate supply curve is represented by:

Which of the following is most likely to shift the potential output of an economy to the right?

Which of the following is true of a beneficial supply shock?

The slope of the short-run aggregate supply curve depends on how sharply:

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

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Exam 10: Aggregate Supply

Which of the following is generally true of nominal wages?

An adverse supply shock would shift:

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year, real wages will:

Suppose the price level increases by 5 percent and the nominal wages of workers increase by 3 percent during a particular year. This implies that the real wage has:

The figure given below depicts long run equilibrium in an aggregate demand-aggregate supply model. Which of the following is indicated by the arrow given in this figure?

When the economy is at its potential output level, which of the following is true?

The figure below shows the equilibrium in an aggregate demand-aggregate supply model. In this figure, which of the following is true for an economy that is at point V in the short run?

Potential output depends on all of the following except one. Which is the exception?

The figure below shows short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y1 level of output, _____.

Given the aggregate demand curve, an increase in the supply of a productive resource will:

Which of the following supply shocks would shift the aggregate supply curve inward?

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on:

If the actual price level is higher than the expected price level, the economy will:

Which of these is most likely to reduce the potential output of an economy?

If resource prices are "sticky" downward and a recessionary gap develops, the short-run aggregate supply curve will:

In the figure given below, when aggregate supply is AS, the equilibrium output and price level will be Y2 and P2.

When resource prices are negotiable, the long-run aggregate supply curve is represented by:

Which of the following is most likely to shift the potential output of an economy to the right?

Which of the following is true of a beneficial supply shock?

The slope of the short-run aggregate supply curve depends on how sharply:

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 short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y₁ level of output, _____.

In the figure given below, when aggregate supply is AS, the equilibrium output and price level will be Y₂ and P₂.