Question 1

-Refer to the graph in the exhibit.Suppose the actual price level is lower than the expected price level.What might equilibrium output be in the short run?

Accepted Answer

A)  Y₂ 
B)  Y₁ 
C)  Y₃ 
D)  zero 
A)  Y₂ 
B)  Y₁ 
C)  Y₃ 
D)  zero A

Question 2

Which of the following shifts the short-run aggregate supply curve to the left?

Accepted Answer

A)  an increase in the price level 
B)  an increase in the expected price level 
C)  an increase in the capital stock 
D)  an increase in interest rates 
A)  an increase in the price level 
B)  an increase in the expected price level 
C)  an increase in the capital stock 
D)  an increase in interest rates B

Question 3

Between 2004 and 2014, Jack's salary increased from $100,000 per year to $200,000 per year.The price index increased from 100 to 300 during the same period.Which statement best describes Jack's situation?

Accepted Answer

A)  Jack's real income increased, and his money income decreased. 
B)  Jack's real income increased, and his money income increased. 
C)  Jack's real income decreased, and his money income decreased. 
D)  Jack's real income decreased, and his money income increased. 
A)  Jack's real income increased, and his money income decreased. 
B)  Jack's real income increased, and his money income increased. 
C)  Jack's real income decreased, and his money income decreased. 
D)  Jack's real income decreased, and his money income increased. D

Question 4

How would a beneficial supply shock affect the aggregate supply curves?

Accepted Answer

A)  The long-run aggregate supply curve would shift inward, and the short-run aggregate supply curve would shift inward. 
B)  The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift outward. 
C)  The short-run aggregate supply curve would shift outward, but the long-run aggregate supply curve would remain the same. 
D)  The long-run aggregate supply curve would shift outward, and short-run aggregate supply curve would shift outward. 
A)  The long-run aggregate supply curve would shift inward, and the short-run aggregate supply curve would shift inward. 
B)  The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift outward. 
C)  The short-run aggregate supply curve would shift outward, but the long-run aggregate supply curve would remain the same. 
D)  The long-run aggregate supply curve would shift outward, and short-run aggregate supply curve would shift outward.

Question 5

What is the definition of the short run?

Accepted Answer

A)  a period of time when there is an expansionary gap and firms run their plants only for short periods 
B)  a period of up to one year long 
C)  a period of time when resource buyers and sellers can adjust fully to changes in the price level 
D)  a period of time during which resource buyers and sellers CANNOT adjust fully to changes in the price level 
A)  a period of time when there is an expansionary gap and firms run their plants only for short periods 
B)  a period of up to one year long 
C)  a period of time when resource buyers and sellers can adjust fully to changes in the price level 
D)  a period of time during which resource buyers and sellers CANNOT adjust fully to changes in the price level

Question 6

Suppose the actual price level is below the expected price level.Given implicit or explicit resource price agreements, what effect will this have on the short-run aggregate supply curve?

Accepted Answer

A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the left. 
D)  The short-run aggregate supply curve will become flatter. 
A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the left. 
D)  The short-run aggregate supply curve will become flatter.

Question 7

Suppose the economy is producing beyond its potential output level.Which of the following best describes the state of the economy?

Accepted Answer

A)  The economy is producing beyond the natural rate of unemployment. 
B)  The economy is producing at its maximum capacity. 
C)  The economy is producing less than its productive capacity. 
D)  The economy is producing at less than its natural rate of unemployment. 
A)  The economy is producing beyond the natural rate of unemployment. 
B)  The economy is producing at its maximum capacity. 
C)  The economy is producing less than its productive capacity. 
D)  The economy is producing at less than its natural rate of unemployment.

Question 8

Suppose an expansionary gap is closed in the long run.How will nominal GDP and real GDP be affected?

Accepted Answer

A)  Nominal GDP will decline, and real GDP will decline. 
B)  Nominal GDP will increase, and real GDP will increase. 
C)  Nominal GDP will increase, but real GDP will decline. 
D)  Nominal GDP will decline, but real GDP will increase. 
A)  Nominal GDP will decline, and real GDP will decline. 
B)  Nominal GDP will increase, and real GDP will increase. 
C)  Nominal GDP will increase, but real GDP will decline. 
D)  Nominal GDP will decline, but real GDP will increase.

Question 9

Suppose workers are willing to work more hours when the nominal wage increases.Which of the following characterizes the economic rationality of their decision?

Accepted Answer

A)  The decision is NOT economically rational, because it should be based on the real wage only. 
B)  The decision could be rational if workers thought that the inflation rate would fall in the future. 
C)  The decision could be rational if workers thought that the real wage had fallen. 
D)  The decision could be rational if workers thought that the nominal wage and the real wage were equal. 
A)  The decision is NOT economically rational, because it should be based on the real wage only. 
B)  The decision could be rational if workers thought that the inflation rate would fall in the future. 
C)  The decision could be rational if workers thought that the real wage had fallen. 
D)  The decision could be rational if workers thought that the nominal wage and the real wage were equal.

Question 10

What types of unemployment can exist in an economy that is at its potential output level?

Accepted Answer

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

Question 11

What does potential output represent?

Accepted Answer

A)  the amount produced when firms' and workers' expectations about the price level are realized 
B)  the amount produced when the actual price level is higher than workers expected 
C)  the amount produced when firms and workers have the same expectations about the price level 
D)  the amount produced when the actual price level remains constant 
A)  the amount produced when firms' and workers' expectations about the price level are realized 
B)  the amount produced when the actual price level is higher than workers expected 
C)  the amount produced when firms and workers have the same expectations about the price level 
D)  the amount produced when the actual price level remains constant

Question 12

-Refer to the graph in the exhibit.How would long-run equilibrium be established, assuming no government intervention?

Accepted Answer

A)  by an increase in short-run aggregate supply to remove the expansionary gap 
B)  by a decrease in short-run aggregate supply to remove the expansionary gap 
C)  by a decrease in short-run aggregate supply to remove the recessionary gap 
D)  by an increase in short-run aggregate supply to remove the recessionary gap 
A)  by an increase in short-run aggregate supply to remove the expansionary gap 
B)  by a decrease in short-run aggregate supply to remove the expansionary gap 
C)  by a decrease in short-run aggregate supply to remove the recessionary gap 
D)  by an increase in short-run aggregate supply to remove the recessionary gap

Question 13

Which of the following is NOT a factor in determining potential output?

Accepted Answer

A)  the supply of labour 
B)  labour productivity 
C)  the technology in current use 
D)  the number of consumers in the market 
A)  the supply of labour 
B)  labour productivity 
C)  the technology in current use 
D)  the number of consumers in the market

Question 14

-Refer to the graph in the exhibit.What does the graph illustrate regarding the economy?

Accepted Answer

A)  that the expansionary gap has been closed 
B)  that the contractionary gap has been closed 
C)  that the economy will experience deflation 
D)  that the economy will experience inflation 
A)  that the expansionary gap has been closed 
B)  that the contractionary gap has been closed 
C)  that the economy will experience deflation 
D)  that the economy will experience inflation

Question 15

Given the aggregate demand curve, what effects will an increase in the supply of a productive resource have on output and price level?

Accepted Answer

A)  Output will increase, but the price level will remain the same. 
B)  The price level will increase, but output will remain the same. 
C)  The price level will decrease, and output will increase. 
D)  The price level will increase, and output will decrease. 
A)  Output will increase, but the price level will remain the same. 
B)  The price level will increase, but output will remain the same. 
C)  The price level will decrease, and output will increase. 
D)  The price level will increase, and output will decrease.

Question 16

Which of the following adjusts to bring aggregate supply and demand into balance?

Accepted Answer

A)  the price level 
B)  the real rate of interest 
C)  the money supply 
D)  technology 
A)  the price level 
B)  the real rate of interest 
C)  the money supply 
D)  technology

Question 17

-Refer to the graph in the exhibit.Which point represents short-run equilibrium?

Accepted Answer

A)  point a 
B)  point b 
C)  point c 
D)  point d 
A)  point a 
B)  point b 
C)  point c 
D)  point d

Question 18

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

Accepted Answer

A)  an expansionary gap 
B)  a recessionary gap 
C)  an increase in potential output 
D)  a decrease in potential output 
A)  an expansionary gap 
B)  a recessionary gap 
C)  an increase in potential output 
D)  a decrease in potential output

Question 19

-Refer to the graph in the exhibit.Suppose the economy is at point M.What will be the effect on the short-run supply curve, assuming no government intervention?

Accepted Answer

A)  The slope of the short-run supply curve will become steeper. 
B)  The short-run supply curve will shift right. 
C)  The short-run supply curve will NOT shift. 
D)  The short-run supply curve will shift to SRS₁₀₉ and the expansionary gap will be eliminated. 
A)  The slope of the short-run supply curve will become steeper. 
B)  The short-run supply curve will shift right. 
C)  The short-run supply curve will NOT shift. 
D)  The short-run supply curve will shift to SRS₁₀₉ and the expansionary gap will be eliminated.

Question 20

-Refer to the graph in the exhibit.Suppose the actual price level exceeds the expected price level.What might the equilibrium output be in the short run?

Accepted Answer

A)  Y₁ 
B)  Y₂ 
C)  Y3  
D)  0 
A)  Y₁ 
B)  Y₂ 
C)  Y3  
D)  0

-Refer to the graph in the exhibit.Suppose the actual price level is lower than the expected price level.What might equilibrium output be in the short run?

Which of the following shifts the short-run aggregate supply curve to the left?

Between 2004 and 2014, Jack's salary increased from $100,000 per year to $200,000 per year.The price index increased from 100 to 300 during the same period.Which statement best describes Jack's situation?

How would a beneficial supply shock affect the aggregate supply curves?

What is the definition of the short run?

Suppose the actual price level is below the expected price level.Given implicit or explicit resource price agreements, what effect will this have on the short-run aggregate supply curve?

Suppose the economy is producing beyond its potential output level.Which of the following best describes the state of the economy?

Suppose an expansionary gap is closed in the long run.How will nominal GDP and real GDP be affected?

Suppose workers are willing to work more hours when the nominal wage increases.Which of the following characterizes the economic rationality of their decision?

What types of unemployment can exist in an economy that is at its potential output level?

What does potential output represent?

-Refer to the graph in the exhibit.How would long-run equilibrium be established, assuming no government intervention?

Which of the following is NOT a factor in determining potential output?

-Refer to the graph in the exhibit.What does the graph illustrate regarding the economy?

Given the aggregate demand curve, what effects will an increase in the supply of a productive resource have on output and price level?

Which of the following adjusts to bring aggregate supply and demand into balance?

-Refer to the graph in the exhibit.Which point represents short-run equilibrium?

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

-Refer to the graph in the exhibit.Suppose the economy is at point M.What will be the effect on the short-run supply curve, assuming no government intervention?

-Refer to the graph in the exhibit.Suppose the actual price level exceeds the expected price level.What might the equilibrium output be in the short run?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

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Exam 11: Aggregate Supply

-Refer to the graph in the exhibit.Suppose the actual price level is lower than the expected price level.What might equilibrium output be in the short run?

Which of the following shifts the short-run aggregate supply curve to the left?

Between 2004 and 2014, Jack's salary increased from $100,000 per year to $200,000 per year.The price index increased from 100 to 300 during the same period.Which statement best describes Jack's situation?

How would a beneficial supply shock affect the aggregate supply curves?

What is the definition of the short run?

Suppose the actual price level is below the expected price level.Given implicit or explicit resource price agreements, what effect will this have on the short-run aggregate supply curve?

Suppose the economy is producing beyond its potential output level.Which of the following best describes the state of the economy?

Suppose an expansionary gap is closed in the long run.How will nominal GDP and real GDP be affected?

Suppose workers are willing to work more hours when the nominal wage increases.Which of the following characterizes the economic rationality of their decision?

What types of unemployment can exist in an economy that is at its potential output level?

What does potential output represent?

-Refer to the graph in the exhibit.How would long-run equilibrium be established, assuming no government intervention?

Which of the following is NOT a factor in determining potential output?

-Refer to the graph in the exhibit.What does the graph illustrate regarding the economy?

Given the aggregate demand curve, what effects will an increase in the supply of a productive resource have on output and price level?

Which of the following adjusts to bring aggregate supply and demand into balance?

-Refer to the graph in the exhibit.Which point represents short-run equilibrium?

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

-Refer to the graph in the exhibit.Suppose the economy is at point M.What will be the effect on the short-run supply curve, assuming no government intervention?

-Refer to the graph in the exhibit.Suppose the actual price level exceeds the expected price level.What might the equilibrium output be in the short run?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters