Question 1

Figure 10-6
  
-In Figure 10-6,which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) 
A)  (1) 
B)  (2) 
C)  (3) 
D)  (4)

Question 2

Most economists agree that the economy will adjust to a recessionary gap,but the adjustment process

Accepted Answer

A)  is rapid and destabilizing. 
B)  is moderately quick, but not as rapid as necessary. 
C)  takes place solely on the supply side. 
D)  is very slow. 
A)  is rapid and destabilizing. 
B)  is moderately quick, but not as rapid as necessary. 
C)  takes place solely on the supply side. 
D)  is very slow.

Question 3

The recessionary gap of the 1990s in Japan led to decreases in the price level.

Accepted Answer

A) True 
 B)False

Question 4

A severe hurricane hits Florida,destroying large amounts of the citrus crop.What is the most likely effect of this on aggregate supply?

Accepted Answer

A)  It will be unchanged. 
B)  No effect, the economy will move along the curve to a higher price level. 
C)  No effect, the economy will move along the curve to a lower price level. 
D)  It will increase. 
E)  It will decrease. 
A)  It will be unchanged. 
B)  No effect, the economy will move along the curve to a higher price level. 
C)  No effect, the economy will move along the curve to a lower price level. 
D)  It will increase. 
E)  It will decrease.

Question 5

The slope of the aggregate supply curve increases as output increases because

Accepted Answer

A)  the cost of resource-use increases as potential is reached. 
B)  consumers are willing to pay more as output expands. 
C)  firms substitute capital for labor as prices increase. 
D)  firms substitute capital for labor as capacity is reached. 
A)  the cost of resource-use increases as potential is reached. 
B)  consumers are willing to pay more as output expands. 
C)  firms substitute capital for labor as prices increase. 
D)  firms substitute capital for labor as capacity is reached.

Question 6

"Stagflation" refers to the unwelcome combination of

Accepted Answer

A)  inflation and rising prices. 
B)  deflation and unemployment. 
C)  inflation and unemployment. 
D)  inflation and expansion. 
A)  inflation and rising prices. 
B)  deflation and unemployment. 
C)  inflation and unemployment. 
D)  inflation and expansion.

Question 7

If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion,the price level will rise.

Accepted Answer

A) True 
 B)False

Question 8

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

Accepted Answer

A)  stagflation 
B)  reflation 
C)  disinflation 
D)  perflation 
A)  stagflation 
B)  reflation 
C)  disinflation 
D)  perflation

Question 9

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

Accepted Answer

A)  growth in aggregate demand. 
B)  growth in aggregate supply. 
C)  a reduction in aggregate demand. 
D)  a reduction in aggregate supply. 
A)  growth in aggregate demand. 
B)  growth in aggregate supply. 
C)  a reduction in aggregate demand. 
D)  a reduction in aggregate supply.

Question 10

If wages or prices of other inputs change,the aggregate supply curve will shift to another position.

Accepted Answer

A) True 
 B)False

Question 11

Figure 10-7
  
-Refer to Figure 10-7.Which of the diagrams in Figure 10-7 represents a decrease in consumer spending combined with a positive supply shock?

Accepted Answer

A)  Panels (
A)  & (
B)  
B)  Panels (
C)  & (
D)  
C)  Panels (
A)  & (
C)  
D)  Panels (
B)  & (
D)  
A)  Panels (
A)  & (
B)  
B)  Panels (
C)  & (
D)  
C)  Panels (
A)  & (
C)  
D)  Panels (
B)  & (
D)

Question 12

Which of the following situations would cause a period of stagflation at a later point in time?

Accepted Answer

A)  a recessionary gap 
B)  a reduction in investment spending 
C)  an increase in technological development 
D)  an inflationary gap 
A)  a recessionary gap 
B)  a reduction in investment spending 
C)  an increase in technological development 
D)  an inflationary gap

Question 13

The self-correcting mechanism would be expected to be very rapid in an economy with

Accepted Answer

A)  a large multiplier. 
B)  flexible prices. 
C)  rigid wages. 
D)  high labor productivity. 
A)  a large multiplier. 
B)  flexible prices. 
C)  rigid wages. 
D)  high labor productivity.

Question 14

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Accepted Answer

A) True 
 B)False

Question 15

An inflationary gap exists when consumers

Accepted Answer

A)  are saving more than businesses are investing. 
B)  and businesses are purchasing less than the economy is capable of producing. 
C)  and businesses are demanding more than the economy is capable of producing. 
D)  and businesses are demanding less than the full employment level of output. 
A)  are saving more than businesses are investing. 
B)  and businesses are purchasing less than the economy is capable of producing. 
C)  and businesses are demanding more than the economy is capable of producing. 
D)  and businesses are demanding less than the full employment level of output.

Question 16

What is meant by an economy's self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gap.

Accepted Answer

The economy's self correcting mechanism

Question 17

Increases in the price of imported oil in 2011 led to a leftward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 18

A common error of business managers is to blame inflation on

Accepted Answer

A)  consumer spending. 
B)  rising wages. 
C)  rising prices. 
D)  rising interest rates. 
E)  rising unemployment. 
A)  consumer spending. 
B)  rising wages. 
C)  rising prices. 
D)  rising interest rates. 
E)  rising unemployment.

Question 19

The investment and capital spending boom of the late 1990s most likely resulted in a(n)

Accepted Answer

A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  steeper aggregate supply curve. 
D)  flatter aggregate supply curve. 
A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  steeper aggregate supply curve. 
D)  flatter aggregate supply curve.

Question 20

Table 10-1
  
-In Table 10-1,what is the equilibrium level of real output and the equilibrium price?

Accepted Answer

A)  $3,100 real output and a price of 75 
B)  $3,250 real output and a price of 110 
C)  $3,350 real output and a price of 90 
D)  $3,400 real output and a price of 75 
A)  $3,100 real output and a price of 75 
B)  $3,250 real output and a price of 110 
C)  $3,350 real output and a price of 90 
D)  $3,400 real output and a price of 75

Figure 10-6 -In Figure 10-6,which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Most economists agree that the economy will adjust to a recessionary gap,but the adjustment process

The recessionary gap of the 1990s in Japan led to decreases in the price level.

A severe hurricane hits Florida,destroying large amounts of the citrus crop.What is the most likely effect of this on aggregate supply?

The slope of the aggregate supply curve increases as output increases because

"Stagflation" refers to the unwelcome combination of

If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion,the price level will rise.

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

If wages or prices of other inputs change,the aggregate supply curve will shift to another position.

Figure 10-7 -Refer to Figure 10-7.Which of the diagrams in Figure 10-7 represents a decrease in consumer spending combined with a positive supply shock?

Which of the following situations would cause a period of stagflation at a later point in time?

The self-correcting mechanism would be expected to be very rapid in an economy with

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

An inflationary gap exists when consumers

What is meant by an economy's self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gap.

Increases in the price of imported oil in 2011 led to a leftward shift of the aggregate supply curve.

A common error of business managers is to blame inflation on

The investment and capital spending boom of the late 1990s most likely resulted in a(n)

Table 10-1 -In Table 10-1,what is the equilibrium level of real output and the equilibrium price?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 10: Bringing in the Supply Side: Unemployment and Inflation?

Figure 10-6 -In Figure 10-6,which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Most economists agree that the economy will adjust to a recessionary gap,but the adjustment process

The recessionary gap of the 1990s in Japan led to decreases in the price level.

A severe hurricane hits Florida,destroying large amounts of the citrus crop.What is the most likely effect of this on aggregate supply?

The slope of the aggregate supply curve increases as output increases because

"Stagflation" refers to the unwelcome combination of

If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion,the price level will rise.

A consequence of an inflationary gap is ____ as output begins to decrease and prices continue to increase.

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

If wages or prices of other inputs change,the aggregate supply curve will shift to another position.

Figure 10-7 -Refer to Figure 10-7.Which of the diagrams in Figure 10-7 represents a decrease in consumer spending combined with a positive supply shock?

Which of the following situations would cause a period of stagflation at a later point in time?

The self-correcting mechanism would be expected to be very rapid in an economy with

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

An inflationary gap exists when consumers

What is meant by an economy's self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gap.

Increases in the price of imported oil in 2011 led to a leftward shift of the aggregate supply curve.

A common error of business managers is to blame inflation on

The investment and capital spending boom of the late 1990s most likely resulted in a(n)

Table 10-1 -In Table 10-1,what is the equilibrium level of real output and the equilibrium price?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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