Question 1

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following supply shocks would shift the aggregate supply curve inward?

Accepted Answer

A)  a decrease in business taxes 
B)  a decrease in gasoline taxes 
C)  a decrease in the cost of raw materials 
D)  a decrease in agricultural output 
E)  a decrease in the amount and cost of government regulation 
A)  a decrease in business taxes 
B)  a decrease in gasoline taxes 
C)  a decrease in the cost of raw materials 
D)  a decrease in agricultural output 
E)  a decrease in the amount and cost of government regulation

Question 3

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. In this Exhibit, if P₁ is the price level prevailing in the economy, it implies that _____

Accepted Answer

A)  there is an expansionary gap. 
B)  the price level will decrease. 
C)  the actual unemployment rate is equal to the natural unemployment rate. 
D)  the actual unemployment rate is below the natural unemployment rate. 
E)  the actual rate of output is more than the potential output. 
A)  there is an expansionary gap. 
B)  the price level will decrease. 
C)  the actual unemployment rate is equal to the natural unemployment rate. 
D)  the actual unemployment rate is below the natural unemployment rate. 
E)  the actual rate of output is more than the potential output.

Question 4

A recessionary gap develops _____

Accepted Answer

A)  when actual output exceeds potential output. 
B)  when resource prices are "sticky" upward. 
C)  only when the economy is in a recession. 
D)  only when GDP grows by more than 4 percent. 
E)  only when unemployment exceeds its natural rate. 
A)  when actual output exceeds potential output. 
B)  when resource prices are "sticky" upward. 
C)  only when the economy is in a recession. 
D)  only when GDP grows by more than 4 percent. 
E)  only when unemployment exceeds its natural rate.

Question 5

Exhibit 10.3
  
-Refer to Exhibit 10.3. When aggregate supply is AS, the equilibrium output and the price level will be Y₂ and P₂, respectively.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is most likely to increase the potential output of an economy?

Accepted Answer

A)  a decline in the length of the average work week 
B)  an increase in the supply of educated and skilled workers 
C)  a drought 
D)  an increase in aggregate demand 
E)  an increase in the minimum wage received by workers 
A)  a decline in the length of the average work week 
B)  an increase in the supply of educated and skilled workers 
C)  a drought 
D)  an increase in aggregate demand 
E)  an increase in the minimum wage received by workers

Question 7

Exhibit 10.3
  
-Refer to Exhibit 10.3, which shows an aggregate demand-aggregate supply model. The shift from AS to AS' is likely to occur when _____

Accepted Answer

A)  the actual price level is higher than expected. 
B)  the actual price level is lower than expected. 
C)  the unemployment rate is lower than the natural rate. 
D)  the actual output is more than the potential output. 
E)  the aggregate demand curve intersects the short-run aggregate supply curve at the potential output. 
A)  the actual price level is higher than expected. 
B)  the actual price level is lower than expected. 
C)  the unemployment rate is lower than the natural rate. 
D)  the actual output is more than the potential output. 
E)  the aggregate demand curve intersects the short-run aggregate supply curve at the potential output.

Question 8

In the long run, a decrease in aggregate demand will lead to a(n) _____

Accepted Answer

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

Question 9

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 the economy is at point H, there is a(n) _____

Accepted Answer

A)  expansionary gap of $300 billion. 
B)  recessionary gap of $300 billion. 
C)  recessionary gap of $10 billion. 
D)  expansionary gap of $20 billion. 
E)  expansionary gap of $10 billion. 
A)  expansionary gap of $300 billion. 
B)  recessionary gap of $300 billion. 
C)  recessionary gap of $10 billion. 
D)  expansionary gap of $20 billion. 
E)  expansionary gap of $10 billion.

Question 10

Table 10.1
 $$\begin{array}{l}
\text { Table } 10.1\
\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Aggregate Output } \
\text { Demanded (\$) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { Level }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Aggregate Output } \
\text { Supplied (\$) }
\end{array} \
\hline 7.0 & 110 & 5.0 \
\hline 6.5 & 120 & 5.5 \
\hline 6.0 & 130 & 6.0 \
\hline 5.5 & 140 & 6.5 \
\hline 5.0 & 150 & 7.0 \
\hline
\end{array}
\end{array}$$
-Refer to Table 10.1, which shows the aggregate demand and aggregate supply in an economy. What is quantity supplied if the price level is at 150?

Accepted Answer

A)  $7.0 
B)  $6.5 
C)  $6.0 
D)  $5.5 
E)  $5.0 
A)  $7.0 
B)  $6.5 
C)  $6.0 
D)  $5.5 
E)  $5.0

Question 11

Exhibit 10.1
  
-Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. What happens to short-run aggregate supply if prices are higher than expected?

Accepted Answer

A)  SRAS shifts right. 
B)  SRAS shifts left. 
C)  There is an upward movement along SRAS to Y₃. 
D)  There is a downward movement along SRAS to Y₂. 
E)  Nothing happens in the short run. 
A)  SRAS shifts right. 
B)  SRAS shifts left. 
C)  There is an upward movement along SRAS to Y₃. 
D)  There is a downward movement along SRAS to Y₂. 
E)  Nothing happens in the short run.

Question 12

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

Accepted Answer

A)  cyclical unemployment 
B)  structural unemployment 
C)  frictional, cyclical, and seasonal unemployment 
D)  frictional, structural, and seasonal unemployment 
E)  seasonal unemployment 
A)  cyclical unemployment 
B)  structural unemployment 
C)  frictional, cyclical, and seasonal unemployment 
D)  frictional, structural, and seasonal unemployment 
E)  seasonal unemployment

Question 13

Does an expansionary gap or a recessionary gap exist if short-run output is $20.0 trillion and potential output is $21.0 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 14

Which of the following is true of a higher price level?

Accepted Answer

A)  The higher the price level, any given money wage purchases less, so the wage is less attractive to workers. 
B)  The higher the price level, any given money wage purchases more, so the wage is more attractive to workers. 
C)  The higher the price level, any given money wage purchases more, so the wage is less attractive to workers. 
D)  The higher the price level, any given money wage purchases less, so the wage is more attractive to workers. 
E)  There is no relationship between the price level and money wages. 
A)  The higher the price level, any given money wage purchases less, so the wage is less attractive to workers. 
B)  The higher the price level, any given money wage purchases more, so the wage is more attractive to workers. 
C)  The higher the price level, any given money wage purchases more, so the wage is less attractive to workers. 
D)  The higher the price level, any given money wage purchases less, so the wage is more attractive to workers. 
E)  There is no relationship between the price level and money wages.

Question 15

If the actual price level is lower than the expected price level, an economy will contract in the short run.

Accepted Answer

A) True 
 B)False

Question 16

How much is the output gap if short-run output is $20.0 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 17

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on _____

Accepted Answer

A)  how quickly planned investment spending adjusts to changes in population growth. 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages. 
C)  how quickly technology changes to increase aggregate supply. 
D)  whether the economy is experiencing a recessionary gap or an expansionary gap. 
E)  how quickly real wages adjust to restore full employment in the labor market. 
A)  how quickly planned investment spending adjusts to changes in population growth. 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages. 
C)  how quickly technology changes to increase aggregate supply. 
D)  whether the economy is experiencing a recessionary gap or an expansionary gap. 
E)  how quickly real wages adjust to restore full employment in the labor market.

Question 18

If the actual price level is higher than the expected price level in an economy, the economy will _____

Accepted Answer

A)  have no structural unemployment. 
B)  experience a recession. 
C)  experience stagflation. 
D)  expand output in the short run. 
E)  have no seasonal unemployment. 
A)  have no structural unemployment. 
B)  experience a recession. 
C)  experience stagflation. 
D)  expand output in the short run. 
E)  have no seasonal unemployment.

Question 19

From 2010 to 2016, _____

Accepted Answer

A)  real GDP expanded and output was below potential output. 
B)  real GDP expanded and output was above potential output. 
C)  nominal GDP expanded and output was below potential output. 
D)  nominal GDP expanded and output was above potential output. 
E)  real GDP and output were unchanged. 
A)  real GDP expanded and output was below potential output. 
B)  real GDP expanded and output was above potential output. 
C)  nominal GDP expanded and output was below potential output. 
D)  nominal GDP expanded and output was above potential output. 
E)  real GDP and output were unchanged.

Question 20

The nominal wage represents _____

Accepted Answer

A)  the wage measured in terms of the quantity of goods and services a worker can purchase with it. 
B)  the wage measured in terms of the dollar value of the goods and services a worker can purchase with it. 
C)  the real wage from which personal taxes have been deducted. 
D)  the standard of living of workers across time. 
E)  the change in real wage brought about by changes in aggregate supply. 
A)  the wage measured in terms of the quantity of goods and services a worker can purchase with it. 
B)  the wage measured in terms of the dollar value of the goods and services a worker can purchase with it. 
C)  the real wage from which personal taxes have been deducted. 
D)  the standard of living of workers across time. 
E)  the change in real wage brought about by changes in aggregate supply.

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

Which of the following supply shocks would shift the aggregate supply curve inward?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. In this Exhibit, if P₁ is the price level prevailing in the economy, it implies that _____

A recessionary gap develops _____

Exhibit 10.3 -Refer to Exhibit 10.3. When aggregate supply is AS, the equilibrium output and the price level will be Y₂ and P₂, respectively.

Which of the following is most likely to increase the potential output of an economy?

Exhibit 10.3 -Refer to Exhibit 10.3, which shows an aggregate demand-aggregate supply model. The shift from AS to AS' is likely to occur when _____

In the long run, a decrease in aggregate demand will lead to a(n) _____

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 the economy is at point H, there is a(n) _____

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. What happens to short-run aggregate supply if prices are higher than expected?

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

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

Which of the following is true of a higher price level?

If the actual price level is lower than the expected price level, an economy will contract in the short run.

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

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on _____

If the actual price level is higher than the expected price level in an economy, the economy will _____

From 2010 to 2016, _____

The nominal wage represents _____

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.

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

Which of the following supply shocks would shift the aggregate supply curve inward?

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply curve of an economy. In this Exhibit, if P₁ is the price level prevailing in the economy, it implies that _____

A recessionary gap develops _____

Exhibit 10.3 -Refer to Exhibit 10.3. When aggregate supply is AS, the equilibrium output and the price level will be Y₂ and P₂, respectively.

Which of the following is most likely to increase the potential output of an economy?

Exhibit 10.3 -Refer to Exhibit 10.3, which shows an aggregate demand-aggregate supply model. The shift from AS to AS' is likely to occur when _____

In the long run, a decrease in aggregate demand will lead to a(n) _____

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 the economy is at point H, there is a(n) _____

Exhibit 10.1 -Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. What happens to short-run aggregate supply if prices are higher than expected?

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

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

Which of the following is true of a higher price level?

If the actual price level is lower than the expected price level, an economy will contract in the short run.

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

The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on _____

If the actual price level is higher than the expected price level in an economy, the economy will _____

From 2010 to 2016, _____

The nominal wage represents _____

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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