Question 1

When the actual price level in an economy turns out to be lower than that expected in the short run, firms _____

Accepted Answer

A)  produce less than the economy's potential output. 
B)  produce more than the economy's potential output. 
C)  produce the same as the economy's potential output. 
D)  increase the quantity supplied. 
E)  an expansionary gap develops. 
A)  produce less than the economy's potential output. 
B)  produce more than the economy's potential output. 
C)  produce the same as the economy's potential output. 
D)  increase the quantity supplied. 
E)  an expansionary gap develops.

Question 2

Exhibit 10.4
  
-Refer to Exhibit 10.4, which shows 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

In the long run, a leftward shift of the aggregate demand curve will lead to a(n) _____

Accepted Answer

A)  increase in the equilibrium output but will not change the price level in an economy. 
B)  increase in the price level as well as the equilibrium output in an economy. 
C)  decrease in the price level but will leave the equilibrium output unchanged in an economy. 
D)  increase in the price level but will leave the equilibrium output unchanged in an economy. 
E)  decrease in the price level as well as the equilibrium output in an economy. 
A)  increase in the equilibrium output but will not change the price level in an economy. 
B)  increase in the price level as well as the equilibrium output in an economy. 
C)  decrease in the price level but will leave the equilibrium output unchanged in an economy. 
D)  increase in the price level but will leave the equilibrium output unchanged in an economy. 
E)  decrease in the price level as well as the equilibrium output in an economy.

Question 4

If the expected price level exceeds the actual price level in an economy, _____

Accepted Answer

A)  firms increase production in the short run. 
B)  firms decrease production in the short run. 
C)  firms maintain production in the short run but increase prices. 
D)  firms maintain production in the short run but decrease prices. 
E)  firms pay higher prices to resources in the short run. 
A)  firms increase production in the short run. 
B)  firms decrease production in the short run. 
C)  firms maintain production in the short run but increase prices. 
D)  firms maintain production in the short run but decrease prices. 
E)  firms pay higher prices to resources in the short run.

Question 5

Exhibit 10.2
  
-Refer to Exhibit 10.2. The short-run equilibrium output in the economy is Y₁.

Accepted Answer

A) True 
 B)False

Question 6

In constructing the short-run aggregate supply curve, we define the short run as the period in which _____

Accepted Answer

A)  the price level is constant. 
B)  output is fixed. 
C)  profit is constant. 
D)  the costs of some resources are fixed. 
E)  the economic growth rate is less than 4 percent. 
A)  the price level is constant. 
B)  output is fixed. 
C)  profit is constant. 
D)  the costs of some resources are fixed. 
E)  the economic growth rate is less than 4 percent.

Question 7

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 8

Potential output depends on all of the following except one. Which is the exception?

Accepted Answer

A)  the supply of labor 
B)  labor productivity 
C)  the stock of capital 
D)  the technology in current use 
E)  the number of consumers in the market 
A)  the supply of labor 
B)  labor productivity 
C)  the stock of capital 
D)  the technology in current use 
E)  the number of consumers in the market

Question 9

If the price level in the current year is much lower than the expected price level in an economy, _____

Accepted Answer

A)  firms will increase production beyond the economy's potential level. 
B)  the natural rate of unemployment rate will increase. 
C)  firms will decrease production below the economy's potential level. 
D)  the short-run aggregate supply curve will become steeper. 
E)  the unemployment rate will fall to zero. 
A)  firms will increase production beyond the economy's potential level. 
B)  the natural rate of unemployment rate will increase. 
C)  firms will decrease production below the economy's potential level. 
D)  the short-run aggregate supply curve will become steeper. 
E)  the unemployment rate will fall to zero.

Question 10

Which of these does not hold true if an economy is simultaneously in long-run and short-run equilibrium?

Accepted Answer

A)  The actual price level equals the expected price level. 
B)  Aggregate quantity supplied equals potential output. 
C)  Aggregate quantity demanded equals potential output. 
D)  Aggregate quantity supplied equals aggregate quantity demanded. 
E)  The aggregate demand curve is horizontal at the potential output level. 
A)  The actual price level equals the expected price level. 
B)  Aggregate quantity supplied equals potential output. 
C)  Aggregate quantity demanded equals potential output. 
D)  Aggregate quantity supplied equals aggregate quantity demanded. 
E)  The aggregate demand curve is horizontal at the potential output level.

Question 11

In a particular year, if the price level rises by 4 percent and the nominal wage of workers rises by 6 percent, we can conclude that the real wage has _____

Accepted Answer

A)  fallen by 2 percent. 
B)  fallen by 10 percent. 
C)  increased by 2 percent. 
D)  increased by 10 percent. 
E)  remained constant. 
A)  fallen by 2 percent. 
B)  fallen by 10 percent. 
C)  increased by 2 percent. 
D)  increased by 10 percent. 
E)  remained constant.

Question 12

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 higher than expected, 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 13

How much is the output gap if short-run output is $21.0 trillion and potential output is $20.0 trillion?

Accepted Answer

A)  $20.0 trillion 
B)  +$1.0 trillion 
C)  -$1 trillion 
D)  -$0.1 trillion 
E)  $0 
A)  $20.0 trillion 
B)  +$1.0 trillion 
C)  -$1 trillion 
D)  -$0.1 trillion 
E)  $0

Question 14

The main effect of an increase in capital stock is a(n) _____

Accepted Answer

A)  rightward shift of the long-run aggregate supply curve. 
B)  rightward shift of the aggregate demand curve. 
C)  leftward shift of the long-run aggregate supply curve. 
D)  leftward shift of the aggregate demand curve. 
E)  increase in the price and output levels. 
A)  rightward shift of the long-run aggregate supply curve. 
B)  rightward shift of the aggregate demand curve. 
C)  leftward shift of the long-run aggregate supply curve. 
D)  leftward shift of the aggregate demand curve. 
E)  increase in the price and output levels.

Question 15

When the actual price level in an economy turns out to be lower than that expected in the short run, _____

Accepted Answer

A)  businesses cut back production. 
B)  the potential output level decreases. 
C)  the aggregate supply curve shifts leftward. 
D)  the aggregate supply curve shifts rightward. 
E)  an expansionary gap develops. 
A)  businesses cut back production. 
B)  the potential output level decreases. 
C)  the aggregate supply curve shifts leftward. 
D)  the aggregate supply curve shifts rightward. 
E)  an expansionary gap develops.

Question 16

The short-run aggregate supply curve shows a(n) _____

Accepted Answer

A)  direct relationship between the expected price level and nominal GDP supplied. 
B)  inverse relationship between the actual price level and real GDP supplied. 
C)  direct relationship between the actual price level and nominal GDP supplied. 
D)  direct relationship between the actual price level and real GDP supplied. 
E)  inverse relationship between the expected price level and real GDP supplied. 
A)  direct relationship between the expected price level and nominal GDP supplied. 
B)  inverse relationship between the actual price level and real GDP supplied. 
C)  direct relationship between the actual price level and nominal GDP supplied. 
D)  direct relationship between the actual price level and real GDP supplied. 
E)  inverse relationship between the expected price level and real GDP supplied.

Question 17

When an economy produces its potential output, _____ is zero.

Accepted Answer

A)  frictional unemployment 
B)  cyclical unemployment 
C)  seasonal unemployment 
D)  structural unemployment 
E)  disguised unemployment 
A)  frictional unemployment 
B)  cyclical unemployment 
C)  seasonal unemployment 
D)  structural unemployment 
E)  disguised unemployment

Question 18

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₃, 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 19

Identify the correct statement.

Accepted Answer

A)  In periods of low inflation, real wages are constant but nominal wages decline. 
B)  If the price level increases, real wages will increase. 
C)  If the price level increases, nominal wages will fall. 
D)  In periods of high inflation, real wages change even if nominal wages remain constant. 
E)  If the inflation rate is high, real wages and nominal wages change by the same amount. 
A)  In periods of low inflation, real wages are constant but nominal wages decline. 
B)  If the price level increases, real wages will increase. 
C)  If the price level increases, nominal wages will fall. 
D)  In periods of high inflation, real wages change even if nominal wages remain constant. 
E)  If the inflation rate is high, real wages and nominal wages change by the same amount.

Question 20

Unexpected events that affect aggregate supply, sometimes only temporarily, are _____

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.

When the actual price level in an economy turns out to be lower than that expected in the short run, firms _____

Exhibit 10.4 -Refer to Exhibit 10.4, which shows 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?

In the long run, a leftward shift of the aggregate demand curve will lead to a(n) _____

If the expected price level exceeds the actual price level in an economy, _____

Exhibit 10.2 -Refer to Exhibit 10.2. The short-run equilibrium output in the economy is Y₁.

In constructing the short-run aggregate supply curve, we define the short run as the period in which _____

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

Potential output depends on all of the following except one. Which is the exception?

If the price level in the current year is much lower than the expected price level in an economy, _____

Which of these does not hold true if an economy is simultaneously in long-run and short-run equilibrium?

In a particular year, if the price level rises by 4 percent and the nominal wage of workers rises by 6 percent, we can conclude that the real wage has _____

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 higher than expected, over the long run the economy moves from _____

How much is the output gap if short-run output is $21.0 trillion and potential output is $20.0 trillion?

The main effect of an increase in capital stock is a(n) _____

When the actual price level in an economy turns out to be lower than that expected in the short run, _____

The short-run aggregate supply curve shows a(n) _____

When an economy produces its potential output, _____ is zero.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₃, firms will _____

Identify the correct statement.

Unexpected events that affect aggregate supply, sometimes only temporarily, are _____

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.

When the actual price level in an economy turns out to be lower than that expected in the short run, firms _____

Exhibit 10.4 -Refer to Exhibit 10.4, which shows 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?

In the long run, a leftward shift of the aggregate demand curve will lead to a(n) _____

If the expected price level exceeds the actual price level in an economy, _____

Exhibit 10.2 -Refer to Exhibit 10.2. The short-run equilibrium output in the economy is Y₁.

In constructing the short-run aggregate supply curve, we define the short run as the period in which _____

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

Potential output depends on all of the following except one. Which is the exception?

If the price level in the current year is much lower than the expected price level in an economy, _____

Which of these does not hold true if an economy is simultaneously in long-run and short-run equilibrium?

In a particular year, if the price level rises by 4 percent and the nominal wage of workers rises by 6 percent, we can conclude that the real wage has _____

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 higher than expected, over the long run the economy moves from _____

How much is the output gap if short-run output is $21.0 trillion and potential output is $20.0 trillion?

The main effect of an increase in capital stock is a(n) _____

When the actual price level in an economy turns out to be lower than that expected in the short run, _____

The short-run aggregate supply curve shows a(n) _____

When an economy produces its potential output, _____ is zero.

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P₃, firms will _____

Identify the correct statement.

Unexpected events that affect aggregate supply, sometimes only temporarily, are _____

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