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

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 at point H, over the long-run 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 3

An increase in aggregate demand in the long run will most likely result in _____

Accepted Answer

A)  a decrease in the price and output levels. 
B)  an increase in the price and output levels. 
C)  an increase in the price level and a decrease in the output level. 
D)  a decrease in the price level and an increase in the output level. 
E)  an increase in the price level but no change in the output level. 
A)  a decrease in the price and output levels. 
B)  an increase in the price and output levels. 
C)  an increase in the price level and a decrease in the output level. 
D)  a decrease in the price level and an increase in the output level. 
E)  an increase in the price level but no change in the output level.

Question 4

Which of the following is true in the long run?

Accepted Answer

A)  The aggregate demand curve determines the level of potential output. 
B)  The long-run aggregate supply curve is horizontal. 
C)  The actual price level and the expected price level are equal. 
D)  Cyclical unemployment is between 5 percent and 6 percent. 
E)  The price level is determined entirely by the long-run aggregate supply curve. 
A)  The aggregate demand curve determines the level of potential output. 
B)  The long-run aggregate supply curve is horizontal. 
C)  The actual price level and the expected price level are equal. 
D)  Cyclical unemployment is between 5 percent and 6 percent. 
E)  The price level is determined entirely by the long-run aggregate supply curve.

Question 5

The international oil price hike by OPEC was an adverse supply shock faced by the United States in the 1970s.

Accepted Answer

A) True 
 B)False

Question 6

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.

Question 7

In the long run, the price level is determined by aggregate supply.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₂, 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 9

Given the aggregate demand curve, a beneficial supply shock will _____

Accepted Answer

A)  increase potential output and the price level. 
B)  decrease potential output and the price level. 
C)  increase potential output and decrease the price level. 
D)  decrease potential output and increase the price level. 
E)  cause no change in potential output or the price level. 
A)  increase potential output and the price level. 
B)  decrease potential output and the price level. 
C)  increase potential output and decrease the price level. 
D)  decrease potential output and increase the price level. 
E)  cause no change in potential output or the price level.

Question 10

Does an expansionary gap or a recessionary gap exist if short-run output is $18.2 trillion and potential output is $18.0 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 11

Which of the following, if true, would suggest that an expansionary gap exists in an economy?

Accepted Answer

A)  rapid inflation during a period when plant capacity utilization is below average 
B)  a steady price level coupled with a 5 percent unemployment rate 
C)  an unemployment rate below its natural rate and an unexpected increase in the consumer price index 
D)  sluggish growth in the rate of inflation and an exceptional increase in the Dow Jones average 
E)  a modest increase in the number of new unemployment claims and a lower-than-expected price level 
A)  rapid inflation during a period when plant capacity utilization is below average 
B)  a steady price level coupled with a 5 percent unemployment rate 
C)  an unemployment rate below its natural rate and an unexpected increase in the consumer price index 
D)  sluggish growth in the rate of inflation and an exceptional increase in the Dow Jones average 
E)  a modest increase in the number of new unemployment claims and a lower-than-expected price level

Question 12

An adverse supply shock generally decreases the price level and real GDP.

Accepted Answer

A) True 
 B)False

Question 13

The fact that some resource prices are fixed by contracts helps explain why firms _____

Accepted Answer

A)  increase output in the short run when the price level increases. 
B)  keep production levels constant in the short run when the price level decreases. 
C)  sell output in the short run at fixed prices. 
D)  increase output in the long run when the price level increases. 
E)  decrease production when nominal wages fall in the long run. 
A)  increase output in the short run when the price level increases. 
B)  keep production levels constant in the short run when the price level decreases. 
C)  sell output in the short run at fixed prices. 
D)  increase output in the long run when the price level increases. 
E)  decrease production when nominal wages fall in the long run.

Question 14

Exhibit 10.8
  
-Refer to Exhibit 10.8, which shows the long-run equilibrium in an aggregate demand-aggregate supply model. Which of these could have caused the movement shown in this exhibit?

Accepted Answer

A)  a decrease in the size of the labor force 
B)  an increase in the price level 
C)  an increase in net investment 
D)  an increase in autonomous consumption 
E)  a decrease in autonomous consumption 
A)  a decrease in the size of the labor force 
B)  an increase in the price level 
C)  an increase in net investment 
D)  an increase in autonomous consumption 
E)  a decrease in autonomous consumption

Question 15

An expansionary gap generally creates inflationary pressure in an economy.

Accepted Answer

A) True 
 B)False

Question 16

How much is the output gap if short-run output is $18.0 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 17

When an economy is producing its potential output, 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 18

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 19

An economy's potential level of output can be altered by changes in _____

Accepted Answer

A)  the actual price level. 
B)  the expected price level. 
C)  aggregate demand. 
D)  real GDP. 
E)  its stock of capital. 
A)  the actual price level. 
B)  the expected price level. 
C)  aggregate demand. 
D)  real GDP. 
E)  its stock of capital.

Question 20

Which of the following changes best represents the effect of the oil embargo (a shut-off of oil from certain OPEC countries) of the 1970s on the U.S. economy?

Accepted Answer

A)  a leftward shift of the long-run aggregate supply curve 
B)  a rightward shift of the long-run aggregate supply curve 
C)  a leftward shift of the aggregate demand curve 
D)  a rightward shift of the aggregate demand curve 
E)  a downward movement along a given aggregate demand curve 
A)  a leftward shift of the long-run aggregate supply curve 
B)  a rightward shift of the long-run aggregate supply curve 
C)  a leftward shift of the aggregate demand curve 
D)  a rightward shift of the aggregate demand curve 
E)  a downward movement along a given aggregate demand curve

Which of the following is generally true of nominal wages?

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 at point H, over the long-run the economy moves from _____

An increase in aggregate demand in the long run will most likely result in _____

Which of the following is true in the long run?

The international oil price hike by OPEC was an adverse supply shock faced by the United States in the 1970s.

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

In the long run, the price level is determined by aggregate supply.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₂, firms will _____

Given the aggregate demand curve, a beneficial supply shock will _____

Does an expansionary gap or a recessionary gap exist if short-run output is $18.2 trillion and potential output is $18.0 trillion?

Which of the following, if true, would suggest that an expansionary gap exists in an economy?

An adverse supply shock generally decreases the price level and real GDP.

The fact that some resource prices are fixed by contracts helps explain why firms _____

Exhibit 10.8 -Refer to Exhibit 10.8, which shows the long-run equilibrium in an aggregate demand-aggregate supply model. Which of these could have caused the movement shown in this exhibit?

An expansionary gap generally creates inflationary pressure in an economy.

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

When an economy is producing its potential output, which of the following is true?

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

An economy's potential level of output can be altered by changes in _____

Which of the following changes best represents the effect of the oil embargo (a shut-off of oil from certain OPEC countries) of the 1970s on the U.S. economy?

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.

Which of the following is generally true of nominal wages?

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 at point H, over the long-run the economy moves from _____

An increase in aggregate demand in the long run will most likely result in _____

Which of the following is true in the long run?

The international oil price hike by OPEC was an adverse supply shock faced by the United States in the 1970s.

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

In the long run, the price level is determined by aggregate supply.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₂, firms will _____

Given the aggregate demand curve, a beneficial supply shock will _____

Does an expansionary gap or a recessionary gap exist if short-run output is $18.2 trillion and potential output is $18.0 trillion?

Which of the following, if true, would suggest that an expansionary gap exists in an economy?

An adverse supply shock generally decreases the price level and real GDP.

The fact that some resource prices are fixed by contracts helps explain why firms _____

Exhibit 10.8 -Refer to Exhibit 10.8, which shows the long-run equilibrium in an aggregate demand-aggregate supply model. Which of these could have caused the movement shown in this exhibit?

An expansionary gap generally creates inflationary pressure in an economy.

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

When an economy is producing its potential output, which of the following is true?

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

An economy's potential level of output can be altered by changes in _____

Which of the following changes best represents the effect of the oil embargo (a shut-off of oil from certain OPEC countries) of the 1970s on the U.S. economy?

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