Question 1

A recessionary gap is usually 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)  upward movement along a fixed short-run aggregate supply curve. 
D)  decrease in aggregate demand. 
E)  downward movement along a fixed short-run aggregate supply curve. 
A)  rightward shift of the short-run aggregate supply curve. 
B)  leftward shift of the short-run aggregate supply curve. 
C)  upward movement along a fixed short-run aggregate supply curve. 
D)  decrease in aggregate demand. 
E)  downward movement along a fixed short-run aggregate supply curve.

Question 2

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

Question 3

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur in the long run?

Accepted Answer

A)  The economy will move upward along the short-run aggregate supply curve. 
B)  The economy will move downward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter. 
A)  The economy will move upward along the short-run aggregate supply curve. 
B)  The economy will move downward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A temporary adverse supply shock, such as a drought _____

Accepted Answer

A)  permanently shifts both the short-run and the long-run aggregate supply curves to the right. 
B)  temporarily shifts both the short-run and the long-run aggregate supply curves to the right. 
C)  permanently shifts both the short-run and the long-run aggregate supply curves to the left. 
D)  temporarily shifts both the short-run and the long-run aggregate supply curves to the left. 
E)  has no effect on either the long-run or the short-run aggregate supply curves. 
A)  permanently shifts both the short-run and the long-run aggregate supply curves to the right. 
B)  temporarily shifts both the short-run and the long-run aggregate supply curves to the right. 
C)  permanently shifts both the short-run and the long-run aggregate supply curves to the left. 
D)  temporarily shifts both the short-run and the long-run aggregate supply curves to the left. 
E)  has no effect on either the long-run or the short-run aggregate supply curves.

Question 6

An expansionary gap in the short run results in _____

Accepted Answer

A)  lower resource prices in the long run. 
B)  unemployment in the long run. 
C)  a recessionary gap in the long run. 
D)  cost-push inflation in the long run. 
E)  demand-pull inflation in the long run. 
A)  lower resource prices in the long run. 
B)  unemployment in the long run. 
C)  a recessionary gap in the long run. 
D)  cost-push inflation in the long run. 
E)  demand-pull inflation in the long run.

Question 7

A temporary adverse supply shock, such as a drought _____

Accepted Answer

A)  lowers the price level and increases output. 
B)  lowers the price level and decreases output. 
C)  raises the price level and increases output. 
D)  raises the price level and decreases output. 
E)  has no effect on either the long-run or the short-run aggregate supply curves. 
A)  lowers the price level and increases output. 
B)  lowers the price level and decreases output. 
C)  raises the price level and increases output. 
D)  raises the price level and decreases output. 
E)  has no effect on either the long-run or the short-run aggregate supply curves.

Question 8

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 the expected price level. 
E)  the actual long-run real GDP minus the 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 the expected price level. 
E)  the actual long-run real GDP minus the actual short-run disposable income.

Question 9

Which of the following is true of the short-run aggregate supply curve?

Accepted Answer

A)  It shows the relation between the inflation rate and the quantity of aggregate output firms supply, other things constant. 
B)  It shows the relation between the price of labor and the aggregate quantity of labor workers supply, other things constant. 
C)  It shows the relation between the interest rate and the quantity of capital goods firms supply, other things constant. 
D)  It shows the relation between the price level and the quantity of aggregate output firms supply, other things constant. 
E)  It shows an inverse relationship between the price level and real GDP. 
A)  It shows the relation between the inflation rate and the quantity of aggregate output firms supply, other things constant. 
B)  It shows the relation between the price of labor and the aggregate quantity of labor workers supply, other things constant. 
C)  It shows the relation between the interest rate and the quantity of capital goods firms supply, other things constant. 
D)  It shows the relation between the price level and the quantity of aggregate output firms supply, other things constant. 
E)  It shows an inverse relationship between the price level and real GDP.

Question 10

Table 10.2
  
-Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #3, the equilibrium output and price level for the economy 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 11

Which of the following is true about wage agreements?

Accepted Answer

A)  Implicit wage agreements are based on a labor contract. 
B)  Explicit wage agreements are based on based on labor market practices. 
C)  Explicit wage agreements are based on a labor contract and implicit wage agreements are based on labor market practices. 
D)  Both explicit wage agreements and implicit wage agreements are based on a labor contract. 
E)  Neither explicit wage agreements nor implicit wage agreements are based on labor market practices. 
A)  Implicit wage agreements are based on a labor contract. 
B)  Explicit wage agreements are based on based on labor market practices. 
C)  Explicit wage agreements are based on a labor contract and implicit wage agreements are based on labor market practices. 
D)  Both explicit wage agreements and implicit wage agreements are based on a labor contract. 
E)  Neither explicit wage agreements nor implicit wage agreements are based on labor market practices.

Question 12

A beneficial supply shock such as a breakthrough in technology _____

Accepted Answer

A)  lowers the price level and increases output. 
B)  lowers the price level and decreases output. 
C)  raises the price level and increases output. 
D)  raises the price level and decreases output. 
E)  has no effect on either the long-run or the short-run aggregate supply curves. 
A)  lowers the price level and increases output. 
B)  lowers the price level and decreases output. 
C)  raises the price level and increases output. 
D)  raises the price level and decreases output. 
E)  has no effect on either the long-run or the short-run aggregate supply curves.

Question 13

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 14

When actual output exceeds potential output, _____

Accepted Answer

A)  more resources become unemployed. 
B)  prices remain constant. 
C)  prices tend to increase. 
D)  nominal GDP decreases. 
E)  resource prices decrease. 
A)  more resources become unemployed. 
B)  prices remain constant. 
C)  prices tend to increase. 
D)  nominal GDP decreases. 
E)  resource prices decrease.

Question 15

If the price level increases by 5 percent and the nominal wage increases by 3.5 percent, the real wage will decrease by 1.5 percent.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following does not influence the position of the long-run aggregate supply curve?

Accepted Answer

A)  the quantity of raw materials available for production 
B)  the quantity of capital used in production 
C)  the quality of the labor force 
D)  the actual price level 
E)  the size of the labor force 
A)  the quantity of raw materials available for production 
B)  the quantity of capital used in production 
C)  the quality of the labor force 
D)  the actual price level 
E)  the size of the labor force

Question 17

Does an expansionary gap or a recessionary gap exist if short-run output is $21.0 trillion and potential output is $20.0 trillion?

Accepted Answer

A)  an expansionary gap 
B)  a recessionary gap 
C)  both an expansionary gap and a recessionary gap 
D)  neither an expansionary gap nor a recessionary gap 
E)  The actual gap is equal to potential output. 
A)  an expansionary gap 
B)  a recessionary gap 
C)  both an expansionary gap and a recessionary gap 
D)  neither an expansionary gap nor a recessionary gap 
E)  The actual gap is equal to potential output.

Question 18

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 prices are as expected at 130, then point Z is _____

Accepted Answer

A)  a short-run and a long-run equilibrium. 
B)  a short-run equilibrium only. 
C)  a long-run equilibrium only. 
D)  neither a short-run nor a long-run equilibrium. 
E)  a medium-run equilibrium. 
A)  a short-run and a long-run equilibrium. 
B)  a short-run equilibrium only. 
C)  a long-run equilibrium only. 
D)  neither a short-run nor a long-run equilibrium. 
E)  a medium-run equilibrium.

Question 19

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 20

The nominal wage is _____

Accepted Answer

A)  always equal to the legal minimum wage. 
B)  the same as the efficiency wage. 
C)  measured in terms of the amount of goods and services it can purchase. 
D)  measured in current dollars rather than in constant dollars. 
E)  measured in constant dollars rather than in current dollars. 
A)  always equal to the legal minimum wage. 
B)  the same as the efficiency wage. 
C)  measured in terms of the amount of goods and services it can purchase. 
D)  measured in current dollars rather than in constant dollars. 
E)  measured in constant dollars rather than in current dollars.

A recessionary gap is usually closed in the long run by a(n) _____

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

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur in the long run?

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

A temporary adverse supply shock, such as a drought _____

An expansionary gap in the short run results in _____

A temporary adverse supply shock, such as a drought _____

An expansionary gap is equal to _____

Which of the following is true of the short-run aggregate supply curve?

Table 10.2 -Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #3, the equilibrium output and price level for the economy are _____

Which of the following is true about wage agreements?

A beneficial supply shock such as a breakthrough in technology _____

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

When actual output exceeds potential output, _____

If the price level increases by 5 percent and the nominal wage increases by 3.5 percent, the real wage will decrease by 1.5 percent.

Which of the following does not influence the position of the long-run aggregate supply curve?

Does an expansionary gap or a recessionary gap exist if short-run output is $21.0 trillion and potential output is $20.0 trillion?

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 prices are as expected at 130, then point Z is _____

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?

The nominal wage is _____

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

Exam 10: Aggregate Supply.

A recessionary gap is usually closed in the long run by a(n) _____

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

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur in the long run?

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

A temporary adverse supply shock, such as a drought _____

An expansionary gap in the short run results in _____

A temporary adverse supply shock, such as a drought _____

An expansionary gap is equal to _____

Which of the following is true of the short-run aggregate supply curve?

Table 10.2 -Refer to Table 10.2, which shows the aggregate demand and aggregate supply in an economy. In schedule #3, the equilibrium output and price level for the economy are _____

Which of the following is true about wage agreements?

A beneficial supply shock such as a breakthrough in technology _____

The actual price level is assumed to be constant along a given short-run aggregate supply curve.

When actual output exceeds potential output, _____

If the price level increases by 5 percent and the nominal wage increases by 3.5 percent, the real wage will decrease by 1.5 percent.

Which of the following does not influence the position of the long-run aggregate supply curve?

Does an expansionary gap or a recessionary gap exist if short-run output is $21.0 trillion and potential output is $20.0 trillion?

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 prices are as expected at 130, then point Z is _____

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?

The nominal wage is _____

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