Question 1

Which of the following is true of an expansionary gap?

Accepted Answer

A)  It develops when the expected price level exceeds the actual price level. 
B)  In the long run, this gap will close when resource suppliers negotiate lower resource payments. 
C)  It measures the amount by which actual output falls short of the economy's potential. 
D)  In the long run, this gap will close when the short-run aggregate supply curve shifts rightward. 
E)  In the long run, this gap will close when resource suppliers negotiate higher resource payments. 
A)  It develops when the expected price level exceeds the actual price level. 
B)  In the long run, this gap will close when resource suppliers negotiate lower resource payments. 
C)  It measures the amount by which actual output falls short of the economy's potential. 
D)  In the long run, this gap will close when the short-run aggregate supply curve shifts rightward. 
E)  In the long run, this gap will close when resource suppliers negotiate higher resource payments.

Question 2

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of the following will be true of an economy in the long run that is at point M in the short run?

Accepted Answer

A)  The actual price level will be lower than the expected price level. 
B)  The actual output will fall short of the potential output. 
C)  The short-run aggregate supply curve will remain stable at SRAS100. 
D)  The short-run aggregate supply curve will shift to SRAS109. 
E)  Real GDP will be equal to nominal GDP. 
A)  The actual price level will be lower than the expected price level. 
B)  The actual output will fall short of the potential output. 
C)  The short-run aggregate supply curve will remain stable at SRAS100. 
D)  The short-run aggregate supply curve will shift to SRAS109. 
E)  Real GDP will be equal to nominal GDP.

Question 3

An expansionary gap is closed in the long run by a(n):

Accepted Answer

A)  rightward shift of the short-run aggregate supply curve. 
B)  leftward shift of the short-run aggregate supply curve. 
C)  movement to the right along a fixed short-run aggregate supply curve. 
D)  increase in aggregate demand. 
E)  decrease in aggregate demand. 
A)  rightward shift of the short-run aggregate supply curve. 
B)  leftward shift of the short-run aggregate supply curve. 
C)  movement to the right along a fixed short-run aggregate supply curve. 
D)  increase in aggregate demand. 
E)  decrease in aggregate demand.

Question 4

In constructing a short-run aggregate supply curve, we assume that the goal of business is to:

Accepted Answer

A)  maximize sales revenue. 
B)  maximize profit. 
C)  maximize growth in assets. 
D)  maximize growth in sales. 
E)  minimize cost. 
A)  maximize sales revenue. 
B)  maximize profit. 
C)  maximize growth in assets. 
D)  maximize growth in sales. 
E)  minimize cost.

Question 5

As actual output falls below the potential level in the short run, which of the following is most likely to occur?

Accepted Answer

A)  More resources will become unemployed. 
B)  The price level will increase. 
C)  Real GDP will increase. 
D)  Nominal GDP will remain constant. 
E)  The natural rate of unemployment will fall. 
A)  More resources will become unemployed. 
B)  The price level will increase. 
C)  Real GDP will increase. 
D)  Nominal GDP will remain constant. 
E)  The natural rate of unemployment will fall.

Question 6

An expansionary gap is equal to:

Accepted Answer

A)  real GDP minus nominal GDP. 
B)  nominal GDP minus real GDP. 
C)  the actual short-run output minus potential output. 
D)  the actual price level minus expected price level. 
E)  the actual long-run real GDP minus actual short-run disposable income. 
A)  real GDP minus nominal GDP. 
B)  nominal GDP minus real GDP. 
C)  the actual short-run output minus potential output. 
D)  the actual price level minus expected price level. 
E)  the actual long-run real GDP minus actual short-run disposable income.

Question 7

Given a downward-sloping aggregate demand curve, if short-run aggregate supply increases, real GDP must increase and nominal GDP must fall.

Accepted Answer

A) True 
 B)False

Question 8

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these statements is true if the economy described by this figure is at point M on SRAS100?

Accepted Answer

A)  The actual price level is lower than expected with a $200 billion expansionary gap. 
B)  The actual price level is lower than expected with a $200 billion recessionary gap. 
C)  The actual price level is higher than expected with a $200 billion recessionary gap. 
D)  The actual price level is higher than expected with a $200 billion expansionary gap. 
E)  The economy is in equilibrium in the short run and the long run. 
A)  The actual price level is lower than expected with a $200 billion expansionary gap. 
B)  The actual price level is lower than expected with a $200 billion recessionary gap. 
C)  The actual price level is higher than expected with a $200 billion recessionary gap. 
D)  The actual price level is higher than expected with a $200 billion expansionary gap. 
E)  The economy is in equilibrium in the short run and the long run.

Question 9

Potential output is the amount produced when:

Accepted Answer

A)  firms' and workers' expectations about the price level are realized. 
B)  the actual price level is higher than the price level expected by workers. 
C)  firms and workers have the same expectations about the price level. 
D)  the actual price level remains constant. 
E)  the actual price level is lower than the price level expected by firms. 
A)  firms' and workers' expectations about the price level are realized. 
B)  the actual price level is higher than the price level expected by workers. 
C)  firms and workers have the same expectations about the price level. 
D)  the actual price level remains constant. 
E)  the actual price level is lower than the price level expected by firms.

Question 10

Cyclical unemployment in an economy will be zero when:

Accepted Answer

A)  there is an expansionary gap in the economy. 
B)  the economy is producing its natural rate of output. 
C)  there is a recessionary gap in the economy. 
D)  the actual price level is equal to the expected price level in the economy. 
E)  the actual price level exceeds the expected price level in the economy. 
A)  there is an expansionary gap in the economy. 
B)  the economy is producing its natural rate of output. 
C)  there is a recessionary gap in the economy. 
D)  the actual price level is equal to the expected price level in the economy. 
E)  the actual price level exceeds the expected price level in the economy.

Which of the following is true of an expansionary gap?

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of the following will be true of an economy in the long run that is at point M in the short run?

An expansionary gap is closed in the long run by a(n):

In constructing a short-run aggregate supply curve, we assume that the goal of business is to:

As actual output falls below the potential level in the short run, which of the following is most likely to occur?

An expansionary gap is equal to:

Given a downward-sloping aggregate demand curve, if short-run aggregate supply increases, real GDP must increase and nominal GDP must fall.

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these statements is true if the economy described by this figure is at point M on SRAS100?

Potential output is the amount produced when:

Cyclical unemployment in an economy will be zero when:

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

Which of the following is true of an expansionary gap?

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of the following will be true of an economy in the long run that is at point M in the short run?

An expansionary gap is closed in the long run by a(n):

In constructing a short-run aggregate supply curve, we assume that the goal of business is to:

As actual output falls below the potential level in the short run, which of the following is most likely to occur?

An expansionary gap is equal to:

Given a downward-sloping aggregate demand curve, if short-run aggregate supply increases, real GDP must increase and nominal GDP must fall.

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these statements is true if the economy described by this figure is at point M on SRAS100?

Potential output is the amount produced when:

Cyclical unemployment in an economy will be zero when:

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