Question 1

Which of the following best describes the relationship between the actual price level and the expected price level in the long run?

Accepted Answer

A)  The actual price level may be less than the expected price level. 
B)  The actual price level may be more than the expected price level. 
C)  The actual price level and the expected price level are equal. 
D)  The actual price level will likely be indeterminate. 
A)  The actual price level may be less than the expected price level. 
B)  The actual price level may be more than the expected price level. 
C)  The actual price level and the expected price level are equal. 
D)  The actual price level will likely be indeterminate.

Question 2

-Refer to the graph in the exhibit.Which of the following causes the shift in the curve?

Accepted Answer

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

Question 3

How is the long-run aggregate supply curve illustrated?

Accepted Answer

A)  by an upward-sloping line 
B)  by a downward-sloping line 
C)  by a vertical line 
D)  by a horizontal line 
A)  by an upward-sloping line 
B)  by a downward-sloping line 
C)  by a vertical line 
D)  by a horizontal line

Question 4

Which of the following is one explanation for the persistently high unemployment rates in Europe during the 1990s?

Accepted Answer

A)  hysteria over downsizing 
B)  the persistently high price levels 
C)  legislation that made it difficult to lay off workers 
D)  a continuing recession that lasted most of the decade 
A)  hysteria over downsizing 
B)  the persistently high price levels 
C)  legislation that made it difficult to lay off workers 
D)  a continuing recession that lasted most of the decade

Question 5

Suppose the actual and expected price levels are initially equal, and the expected price level falls.Which of the following will occur over the long run?

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 right. 
D)  The short-run aggregate supply curve will shift to the left. 
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 right. 
D)  The short-run aggregate supply curve will shift to the left.

Question 6

Which of the following characterizes the relationship between real wages and nominal wages?

Accepted Answer

A)  The real wage will be constant only if the inflation rate is constant. 
B)  Changes in the nominal wage will be the same as changes in the real wage only if the price level is constant. 
C)  The real wage will be constant only if the price level is constant. 
D)  The real wage will be constant only if the nominal wage is constant. 
A)  The real wage will be constant only if the inflation rate is constant. 
B)  Changes in the nominal wage will be the same as changes in the real wage only if the price level is constant. 
C)  The real wage will be constant only if the price level is constant. 
D)  The real wage will be constant only if the nominal wage is constant.

Question 7

Suppose a firm is comparing its marginal revenue (MR) and marginal cost (MC).What circumstances would cause the firm to expand its production?

Accepted Answer

A)  if MR is greater than MC 
B)  if MR is less than MC 
C)  if MR equals MC 
D)  if MR equals 0 
A)  if MR is greater than MC 
B)  if MR is less than MC 
C)  if MR equals MC 
D)  if MR equals 0

Question 8

Why is compensation usually negotiated in terms of a nominal wage?

Accepted Answer

A)  because employers want to pay low real wages 
B)  because workers are concerned only about the nominal wage 
C)  because firms are concerned only about the nominal wage 
D)  because wage agreements are based on expected price levels 
A)  because employers want to pay low real wages 
B)  because workers are concerned only about the nominal wage 
C)  because firms are concerned only about the nominal wage 
D)  because wage agreements are based on expected price levels

Question 9

What is the term for wages in dollars as measured by the amount of goods and services that the dollars buy?

Accepted Answer

A)  real wages 
B)  inflationary wages 
C)  nominal wages 
D)  normal wages 
A)  real wages 
B)  inflationary wages 
C)  nominal wages 
D)  normal wages

Question 10

Suppose an economic contraction occurs, due to a shift in aggregate demand.How will prices change, assuming no government intervention?

Accepted Answer

A)  Prices will rise in the short run, and rise even more in the long run. 
B)  Prices will rise in the short run, and fall back to their original level in the long run. 
C)  Prices will fall in the short run, and fall even more in the long run. 
D)  Prices will fall in the short run, and rise back to their original level in the long run. 
A)  Prices will rise in the short run, and rise even more in the long run. 
B)  Prices will rise in the short run, and fall back to their original level in the long run. 
C)  Prices will fall in the short run, and fall even more in the long run. 
D)  Prices will fall in the short run, and rise back to their original level in the long run.

Question 11

How are prices and output affected when the long-run aggregate supply curve shifts left?

Accepted Answer

A)  Prices increase and output increases. 
B)  Prices decrease and output decreases. 
C)  Prices increase and output decreases. 
D)  Prices decrease and output increases. 
A)  Prices increase and output increases. 
B)  Prices decrease and output decreases. 
C)  Prices increase and output decreases. 
D)  Prices decrease and output increases.

Question 12

What is an expansionary gap equal to?

Accepted Answer

A)  real GDP minus nominal GDP 
B)  nominal GDP minus real GDP 
C)  actual short-run output minus potential output 
D)  the current period's nominal GDP minus the preceding period's nominal GDP 
A)  real GDP minus nominal GDP 
B)  nominal GDP minus real GDP 
C)  actual short-run output minus potential output 
D)  the current period's nominal GDP minus the preceding period's nominal GDP

Question 13

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

Accepted Answer

A)  an increase in short-run aggregate supply 
B)  an increase in long-run aggregate supply 
C)  a decrease in short-run aggregate supply 
D)  a decrease in long-run aggregate supply 
A)  an increase in short-run aggregate supply 
B)  an increase in long-run aggregate supply 
C)  a decrease in short-run aggregate supply 
D)  a decrease in long-run aggregate supply

Question 14

Assume that an economy is operating beyond its productive capacity and there is no government intervention.Suppose workers and other resource suppliers negotiate higher resource payments.What will be the effect on the short-run aggregate supply curve?

Accepted Answer

A)  The short-run aggregate supply curve will shift leftward. 
B)  A leftward movement will occur along a fixed short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will NOT shift. 
D)  The short-run aggregate supply curve will shift rightward. 
A)  The short-run aggregate supply curve will shift leftward. 
B)  A leftward movement will occur along a fixed short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will NOT shift. 
D)  The short-run aggregate supply curve will shift rightward.

Question 15

-Refer to the graph in the exhibit.Consider income level Y₁.What type of gap is this?

Accepted Answer

A)  a recessionary gap 
B)  an expansionary gap 
C)  a potential gap 
D)  an actual gap 
A)  a recessionary gap 
B)  an expansionary gap 
C)  a potential gap 
D)  an actual gap

Question 16

Which of the following is NOT a beneficial supply shock?

Accepted Answer

A)  an abundant harvest that increases food supplies 
B)  discoveries of natural resources 
C)  technological advances 
D)  an embargo on trade in oil 
A)  an abundant harvest that increases food supplies 
B)  discoveries of natural resources 
C)  technological advances 
D)  an embargo on trade in oil

Question 17

Which of the following would cause the long-run aggregate supply curve to shift rightward?

Accepted Answer

A)  a rise in energy prices 
B)  a drop in the actual price level 
C)  if workers opt for more leisure time and less time on the job 
D)  if a technological breakthrough, with widespread practical applications, occurs in the microcomputer industry 
A)  a rise in energy prices 
B)  a drop in the actual price level 
C)  if workers opt for more leisure time and less time on the job 
D)  if a technological breakthrough, with widespread practical applications, occurs in the microcomputer industry

Question 18

Suppose the price level turns out to be higher than expected in the short run.Which of the following actions will businesses take?

Accepted Answer

A)  Businesses will increase production. 
B)  Businesses will decrease production. 
C)  Initially, the short-run aggregate supply curve will shift rightward, but later an upward movement will occur along that curve. 
D)  Initially, the short-run aggregate supply curve will shift rightward, but later a downward movement will occur along that curve. 
A)  Businesses will increase production. 
B)  Businesses will decrease production. 
C)  Initially, the short-run aggregate supply curve will shift rightward, but later an upward movement will occur along that curve. 
D)  Initially, the short-run aggregate supply curve will shift rightward, but later a downward movement will occur along that curve.

Question 19

-Refer to the graph in the exhibit.Which of the following would represent an expansionary gap?

Accepted Answer

A)  Y₂ - Y₁ 
B)  Y3 - Y₁ 
C)  Y₂ - Y3  
D)  Y₂ + Y₁ 
A)  Y₂ - Y₁ 
B)  Y3 - Y₁ 
C)  Y₂ - Y3  
D)  Y₂ + Y₁

Question 20

In constructing a short-run aggregate supply curve, what would an economist assume is the goal of business?

Accepted Answer

A)  to maximize sales revenue 
B)  to maximize profit 
C)  to maximize growth in sales 
D)  to minimize cost 
A)  to maximize sales revenue 
B)  to maximize profit 
C)  to maximize growth in sales 
D)  to minimize cost

Which of the following best describes the relationship between the actual price level and the expected price level in the long run?

-Refer to the graph in the exhibit.Which of the following causes the shift in the curve?

How is the long-run aggregate supply curve illustrated?

Which of the following is one explanation for the persistently high unemployment rates in Europe during the 1990s?

Suppose the actual and expected price levels are initially equal, and the expected price level falls.Which of the following will occur over the long run?

Which of the following characterizes the relationship between real wages and nominal wages?

Suppose a firm is comparing its marginal revenue (MR) and marginal cost (MC).What circumstances would cause the firm to expand its production?

Why is compensation usually negotiated in terms of a nominal wage?

What is the term for wages in dollars as measured by the amount of goods and services that the dollars buy?

Suppose an economic contraction occurs, due to a shift in aggregate demand.How will prices change, assuming no government intervention?

How are prices and output affected when the long-run aggregate supply curve shifts left?

What is an expansionary gap equal to?

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

Assume that an economy is operating beyond its productive capacity and there is no government intervention.Suppose workers and other resource suppliers negotiate higher resource payments.What will be the effect on the short-run aggregate supply curve?

-Refer to the graph in the exhibit.Consider income level Y₁.What type of gap is this?

Which of the following is NOT a beneficial supply shock?

Which of the following would cause the long-run aggregate supply curve to shift rightward?

Suppose the price level turns out to be higher than expected in the short run.Which of the following actions will businesses take?

-Refer to the graph in the exhibit.Which of the following would represent an expansionary gap?

In constructing a short-run aggregate supply curve, what would an economist assume is the goal of business?

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

Which of the following best describes the relationship between the actual price level and the expected price level in the long run?

-Refer to the graph in the exhibit.Which of the following causes the shift in the curve?

How is the long-run aggregate supply curve illustrated?

Which of the following is one explanation for the persistently high unemployment rates in Europe during the 1990s?

Suppose the actual and expected price levels are initially equal, and the expected price level falls.Which of the following will occur over the long run?

Which of the following characterizes the relationship between real wages and nominal wages?

Suppose a firm is comparing its marginal revenue (MR) and marginal cost (MC).What circumstances would cause the firm to expand its production?

Why is compensation usually negotiated in terms of a nominal wage?

What is the term for wages in dollars as measured by the amount of goods and services that the dollars buy?

Suppose an economic contraction occurs, due to a shift in aggregate demand.How will prices change, assuming no government intervention?

How are prices and output affected when the long-run aggregate supply curve shifts left?

What is an expansionary gap equal to?

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

Assume that an economy is operating beyond its productive capacity and there is no government intervention.Suppose workers and other resource suppliers negotiate higher resource payments.What will be the effect on the short-run aggregate supply curve?

-Refer to the graph in the exhibit.Consider income level Y₁.What type of gap is this?

Which of the following is NOT a beneficial supply shock?

Which of the following would cause the long-run aggregate supply curve to shift rightward?

Suppose the price level turns out to be higher than expected in the short run.Which of the following actions will businesses take?

-Refer to the graph in the exhibit.Which of the following would represent an expansionary gap?

In constructing a short-run aggregate supply curve, what would an economist assume is the goal of business?

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