Question 1

How much is the output gap if short-run output is $18.2 trillion and potential output is $18.0 trillion?

Accepted Answer

A)  $18.2 trillion 
B)  $18.0 trillion 
C)  +$0.2 trillion 
D)  -$0.2 trillion 
E)  $0 
A)  $18.2 trillion 
B)  $18.0 trillion 
C)  +$0.2 trillion 
D)  -$0.2 trillion 
E)  $0

Question 2

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₁, firms will _____

Accepted Answer

A)  supply less than potential output. 
B)  supply more than potential output. 
C)  supply potential output. 
D)  increase prices. 
E)  decrease prices. 
A)  supply less than potential output. 
B)  supply more than potential output. 
C)  supply potential output. 
D)  increase prices. 
E)  decrease prices.

Question 3

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the left of Y₁, _____

Accepted Answer

A)  output levels are at the economy's potential. 
B)  output levels are more than the economy's potential. 
C)  output levels are less than the economy's potential. 
D)  unemployment is at the natural rate. 
E)  unemployment is lower than the natural rate. 
A)  output levels are at the economy's potential. 
B)  output levels are more than the economy's potential. 
C)  output levels are less than the economy's potential. 
D)  unemployment is at the natural rate. 
E)  unemployment is lower than the natural rate.

Question 5

Exhibit 10.7
  
-Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If output was $7.5 trillion at point W and decreases to 7.2 trillion, the economy moves from _____

Accepted Answer

A)  Z to H. 
B)  Z to W. 
C)  H to Z. 
D)  W to Z. 
E)  W to H. 
A)  Z to H. 
B)  Z to W. 
C)  H to Z. 
D)  W to Z. 
E)  W to H.

Question 6

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. If P₃ is the price level prevailing in the economy, _____

Accepted Answer

A)  there is an expansionary gap. 
B)  there is a recessionary gap. 
C)  the price level will rise. 
D)  the actual unemployment rate is above the natural rate. 
E)  potential output is greater than actual output. 
A)  there is an expansionary gap. 
B)  there is a recessionary gap. 
C)  the price level will rise. 
D)  the actual unemployment rate is above the natural rate. 
E)  potential output is greater than actual output.

Question 7

Exhibit 10.9
  
-Refer to Exhibit 10.9, which shows the long-run equilibrium in the aggregate demand-aggregate supply model. Which of the following changes is depicted by the movement from Y₁ to Y₂?

Accepted Answer

A)  an increase in long-run aggregate supply 
B)  an increase in short-run aggregate supply 
C)  a decrease in short-run aggregate supply 
D)  a decrease in long-run aggregate supply 
E)  an increase in the aggregate quantity demanded 
A)  an increase in long-run aggregate supply 
B)  an increase in short-run aggregate supply 
C)  a decrease in short-run aggregate supply 
D)  a decrease in long-run aggregate supply 
E)  an increase in the aggregate quantity demanded

Question 8

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 9

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At Y₃, _____

Accepted Answer

A)  output levels are at the economy's potential. 
B)  output levels are less than the economy's potential. 
C)  unemployment is at the natural rate. 
D)  unemployment is higher than the natural rate. 
E)  unemployment is lower than the natural rate. 
A)  output levels are at the economy's potential. 
B)  output levels are less than the economy's potential. 
C)  unemployment is at the natural rate. 
D)  unemployment is higher than the natural rate. 
E)  unemployment is lower than the natural rate.

Question 10

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 11

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 12

The long run is the period of time during which _____

Accepted Answer

A)  real wage is exactly equal to nominal wage. 
B)  inflation is zero. 
C)  excess aggregate demand leads to a shortage. 
D)  real wages are constant. 
E)  all resource prices are variable. 
A)  real wage is exactly equal to nominal wage. 
B)  inflation is zero. 
C)  excess aggregate demand leads to a shortage. 
D)  real wages are constant. 
E)  all resource prices are variable.

Question 13

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

Accepted Answer

A)  firms 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)  firms 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 14

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 15

Which of the following is true in the short run but not in the long run?

Accepted Answer

A)  Actual output is equal to potential output. 
B)  Actual output can exceed potential output. 
C)  Structural unemployment can exist. 
D)  Frictional unemployment can exist. 
E)  Real and nominal GDP can differ. 
A)  Actual output is equal to potential output. 
B)  Actual output can exceed potential output. 
C)  Structural unemployment can exist. 
D)  Frictional unemployment can exist. 
E)  Real and nominal GDP can differ.

Question 16

Exhibit 10.5
  
-Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. The distance between Y₁ and Y₂ represents _____

Accepted Answer

A)  an expansionary gap. 
B)  a recessionary gap. 
C)  the potential output. 
D)  seasonal unemployment. 
E)  structural unemployment. 
A)  an expansionary gap. 
B)  a recessionary gap. 
C)  the potential output. 
D)  seasonal unemployment. 
E)  structural unemployment.

Question 17

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

Accepted Answer

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

Question 18

Unexpected events that reduce aggregate supply, sometimes only temporarily, are _____ shocks.

Accepted Answer

A)  supply shocks. 
B)  demand shocks. 
C)  beneficial supply shocks. 
D)  adverse supply shocks. 
E)  unexpected shocks. 
A)  supply shocks. 
B)  demand shocks. 
C)  beneficial supply shocks. 
D)  adverse supply shocks. 
E)  unexpected shocks.

Question 19

Suppose an economy is initially in long-run equilibrium, and it then experiences a supply shock in the form of exceptionally high energy prices. Which of these will be true in this economy?

Accepted Answer

A)  The short-run aggregate supply curve will shift leftward, and the long-run supply curve will shift rightward. 
B)  The short-run aggregate supply curve and the long-run aggregate supply curve will shift rightward. 
C)  The short-run aggregate supply curve will not shift, and the long-run aggregate supply curve will shift rightward. 
D)  The short-run aggregate supply curve will shift rightward, but the long-run aggregate supply curve will not shift. 
E)  The short-run aggregate supply curve and the long-run aggregate supply curve will shift leftward. 
A)  The short-run aggregate supply curve will shift leftward, and the long-run supply curve will shift rightward. 
B)  The short-run aggregate supply curve and the long-run aggregate supply curve will shift rightward. 
C)  The short-run aggregate supply curve will not shift, and the long-run aggregate supply curve will shift rightward. 
D)  The short-run aggregate supply curve will shift rightward, but the long-run aggregate supply curve will not shift. 
E)  The short-run aggregate supply curve and the long-run aggregate supply curve will shift leftward.

Question 20

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.

How much is the output gap if short-run output is $18.2 trillion and potential output is $18.0 trillion?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₁, firms will _____

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the left of Y₁, _____

Exhibit 10.7 -Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If output was $7.5 trillion at point W and decreases to 7.2 trillion, the economy moves from _____

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. If P₃ is the price level prevailing in the economy, _____

Exhibit 10.9 -Refer to Exhibit 10.9, which shows the long-run equilibrium in the aggregate demand-aggregate supply model. Which of the following changes is depicted by the movement from Y₁ to Y₂?

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

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At Y₃, _____

Which of the following is true of an expansionary gap?

Potential output is the amount produced when _____

The long run is the period of time during which _____

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

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

Which of the following is true in the short run but not in the long run?

Exhibit 10.5 -Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. The distance between Y₁ and Y₂ represents _____

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

Unexpected events that reduce aggregate supply, sometimes only temporarily, are _____ shocks.

Suppose an economy is initially in long-run equilibrium, and it then experiences a supply shock in the form of exceptionally high energy prices. Which of these will be true in this economy?

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?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

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Exam 10: Aggregate Supply.

How much is the output gap if short-run output is $18.2 trillion and potential output is $18.0 trillion?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₁, firms will _____

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. To the left of Y₁, _____

Exhibit 10.7 -Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If output was $7.5 trillion at point W and decreases to 7.2 trillion, the economy moves from _____

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. If P₃ is the price level prevailing in the economy, _____

Exhibit 10.9 -Refer to Exhibit 10.9, which shows the long-run equilibrium in the aggregate demand-aggregate supply model. Which of the following changes is depicted by the movement from Y₁ to Y₂?

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

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At Y₃, _____

Which of the following is true of an expansionary gap?

Potential output is the amount produced when _____

The long run is the period of time during which _____

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

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

Which of the following is true in the short run but not in the long run?

Exhibit 10.5 -Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. The distance between Y₁ and Y₂ represents _____

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

Unexpected events that reduce aggregate supply, sometimes only temporarily, are _____ shocks.

Suppose an economy is initially in long-run equilibrium, and it then experiences a supply shock in the form of exceptionally high energy prices. Which of these will be true in this economy?

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?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters