Question 1

What does the nominal wage represent?

Accepted Answer

A)  the quantity of goods and services a worker can purchase in exchange for performing work 
B)  the dollar value of the goods and services a worker can purchase in exchange for performing work 
C)  a worker's real wages minus taxes paid on wages 
D)  a worker's real wages divided by the price level 
A)  the quantity of goods and services a worker can purchase in exchange for performing work 
B)  the dollar value of the goods and services a worker can purchase in exchange for performing work 
C)  a worker's real wages minus taxes paid on wages 
D)  a worker's real wages divided by the price level

Question 2

Which of the following is an example of a beneficial supply shock?

Accepted Answer

A)  an embargo on trade in oil 
B)  a tornado 
C)  a drought 
D)  a new invention 
A)  an embargo on trade in oil 
B)  a tornado 
C)  a drought 
D)  a new invention

Question 3

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will unemployment be affected?

Accepted Answer

A)  Unemployment will increase. 
B)  Unemployment will decrease. 
C)  Unemployment will stay the same. 
D)  Unemployment will become underemployment. 
A)  Unemployment will increase. 
B)  Unemployment will decrease. 
C)  Unemployment will stay the same. 
D)  Unemployment will become underemployment.

Question 4

In the long run, how will a decrease in aggregate demand affect price and output?

Accepted Answer

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

Question 5

What does the long-run equilibrium price level represent?

Accepted Answer

A)  the price level the economy is expected to reach when the economy produces its potential output 
B)  the price level the economy is expected to reach when interest rates are stabilized 
C)  the price level the economy is expected to reach when the federal budget is balanced 
D)  the price level the economy is expected to reach when the discount rate equals the prime rate 
A)  the price level the economy is expected to reach when the economy produces its potential output 
B)  the price level the economy is expected to reach when interest rates are stabilized 
C)  the price level the economy is expected to reach when the federal budget is balanced 
D)  the price level the economy is expected to reach when the discount rate equals the prime rate

Question 6

In the long run, how will an increase in aggregate demand affect price and output?

Accepted Answer

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

Question 7

-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 8

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

Accepted Answer

A)  weather conditions that lead to worldwide crop failures 
B)  an attempt by key resource producers to monopolize supply 
C)  a decrease in government spending 
D)  an increase in labour productivity 
A)  weather conditions that lead to worldwide crop failures 
B)  an attempt by key resource producers to monopolize supply 
C)  a decrease in government spending 
D)  an increase in labour productivity

Question 9

In long-run equilibrium, what is the relationship between actual and potential output?

Accepted Answer

A)  Actual output can exceed potential output. 
B)  Potential output can exceed actual output. 
C)  Actual output must equal potential output. 
D)  Actual output may be more than potential output or it may be less than potential output. 
A)  Actual output can exceed potential output. 
B)  Potential output can exceed actual output. 
C)  Actual output must equal potential output. 
D)  Actual output may be more than potential output or it may be less than potential output.

Question 10

Suppose the price level is rising faster than expected.Which of the following is among the reasons a firm would find it profitable to expand output in the short run?

Accepted Answer

A)  All the firm's costs are contractually fixed. 
B)  Prices for the firm's output are rising with the price level. 
C)  The firm is interested in minimizing cost per unit, but NOT total profits. 
D)  All of the firm's costs are variable. 
A)  All the firm's costs are contractually fixed. 
B)  Prices for the firm's output are rising with the price level. 
C)  The firm is interested in minimizing cost per unit, but NOT total profits. 
D)  All of the firm's costs are variable.

Question 11

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Accepted Answer

A)  The expected price level rises, shifting aggregate demand to the right. 
B)  The expected price level rises, shifting aggregate demand to the left. 
C)  The expected price level falls, shifting aggregate supply to the right. 
D)  The expected price level falls, shifting aggregate supply to the left. 
A)  The expected price level rises, shifting aggregate demand to the right. 
B)  The expected price level rises, shifting aggregate demand to the left. 
C)  The expected price level falls, shifting aggregate supply to the right. 
D)  The expected price level falls, shifting aggregate supply to the left.

Question 12

Suppose the expected price level exceeds the actual price level.How will this affect output?

Accepted Answer

A)  Firms will expand output, hoping that prices will rise. 
B)  Firms will expand output if some resources are fixed by contracts. 
C)  Firms will reduce output if some resource prices are fixed by contracts. 
D)  Firms will reduce output if workers suffer from money illusion. 
A)  Firms will expand output, hoping that prices will rise. 
B)  Firms will expand output if some resources are fixed by contracts. 
C)  Firms will reduce output if some resource prices are fixed by contracts. 
D)  Firms will reduce output if workers suffer from money illusion.

Question 13

Suppose the economy is at its potential output level.Which of the following best describes the price level?

Accepted Answer

A)  The actual price level is less than the expected price level. 
B)  The actual price level is greater than the expected price level. 
C)  The actual price level is the same as the expected price level. 
D)  The actual price level is NOT the same as its expected price level. 
A)  The actual price level is less than the expected price level. 
B)  The actual price level is greater than the expected price level. 
C)  The actual price level is the same as the expected price level. 
D)  The actual price level is NOT the same as its expected price level.

Question 14

In theory what kind of unemployment can exist in the short run, but NOT in the long run?

Accepted Answer

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

Question 15

Which term refers to a wage rate above what is necessary to attract a sufficient number of workers?

Accepted Answer

A)  market-clearing wage 
B)  efficiency wage 
C)  marginal productivity wage 
D)  minimum wage 
A)  market-clearing wage 
B)  efficiency wage 
C)  marginal productivity wage 
D)  minimum wage

Question 16

Suppose that the real wage remained unchanged between year 1 and 2 but the nominal wage was $20 in year 1 and $18 in year 2.How was the price level affected?

Accepted Answer

A)  It rose by 20 percent. 
B)  It rose by 25 percent. 
C)  It fell by 10 percent. 
D)  It fell by 20 percent. 
A)  It rose by 20 percent. 
B)  It rose by 25 percent. 
C)  It fell by 10 percent. 
D)  It fell by 20 percent.

Question 17

Suppose a recessionary gap exists and resource prices are NOT flexible downward.What will be the effect on the short-run aggregate supply curve?

Accepted Answer

A)  It will shift leftward, to return the economy to its potential output. 
B)  It will shift rightward, to return the economy to its potential output. 
C)  It will remain the same, and the recessionary gap will continue. 
D)  It will become the long-run aggregate supply curve. 
A)  It will shift leftward, to return the economy to its potential output. 
B)  It will shift rightward, to return the economy to its potential output. 
C)  It will remain the same, and the recessionary gap will continue. 
D)  It will become the long-run aggregate supply curve.

Question 18

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision, how can they offset the initial shift?

Accepted Answer

A)  by shifting the aggregate supply right 
B)  by shifting the aggregate supply left 
C)  by shifting the aggregate demand right 
D)  by shifting the aggregate demand left 
A)  by shifting the aggregate supply right 
B)  by shifting the aggregate supply left 
C)  by shifting the aggregate demand right 
D)  by shifting the aggregate demand left

Question 19

-Refer to the graph in the exhibit.If the economy is at point H, what is the gap?

Accepted Answer

A)  an expansionary gap of $300 billion 
B)  a recessionary gap of $300 billion 
C)  an expansionary gap of 20 
D)  a recessionary gap of 10 
A)  an expansionary gap of $300 billion 
B)  a recessionary gap of $300 billion 
C)  an expansionary gap of 20 
D)  a recessionary gap of 10

Question 20

Given a long-run aggregate supply curve, what would the aggregate demand curve illustrate?

Accepted Answer

A)  the price level and the output level 
B)  only the price level 
C)  only the output level 
D)  only the income level 
A)  the price level and the output level 
B)  only the price level 
C)  only the output level 
D)  only the income level

What does the nominal wage represent?

Which of the following is an example of a beneficial supply shock?

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will unemployment be affected?

In the long run, how will a decrease in aggregate demand affect price and output?

What does the long-run equilibrium price level represent?

In the long run, how will an increase in aggregate demand affect price and output?

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

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

In long-run equilibrium, what is the relationship between actual and potential output?

Suppose the price level is rising faster than expected.Which of the following is among the reasons a firm would find it profitable to expand output in the short run?

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Suppose the expected price level exceeds the actual price level.How will this affect output?

Suppose the economy is at its potential output level.Which of the following best describes the price level?

In theory what kind of unemployment can exist in the short run, but NOT in the long run?

Which term refers to a wage rate above what is necessary to attract a sufficient number of workers?

Suppose that the real wage remained unchanged between year 1 and 2 but the nominal wage was $20 in year 1 and $18 in year 2.How was the price level affected?

Suppose a recessionary gap exists and resource prices are NOT flexible downward.What will be the effect on the short-run aggregate supply curve?

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision, how can they offset the initial shift?

-Refer to the graph in the exhibit.If the economy is at point H, what is the gap?

Given a long-run aggregate supply curve, what would the aggregate demand curve illustrate?

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

Exam 11: Aggregate Supply

What does the nominal wage represent?

Which of the following is an example of a beneficial supply shock?

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will unemployment be affected?

In the long run, how will a decrease in aggregate demand affect price and output?

What does the long-run equilibrium price level represent?

In the long run, how will an increase in aggregate demand affect price and output?

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

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

In long-run equilibrium, what is the relationship between actual and potential output?

Suppose the price level is rising faster than expected.Which of the following is among the reasons a firm would find it profitable to expand output in the short run?

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Suppose the expected price level exceeds the actual price level.How will this affect output?

Suppose the economy is at its potential output level.Which of the following best describes the price level?

In theory what kind of unemployment can exist in the short run, but NOT in the long run?

Which term refers to a wage rate above what is necessary to attract a sufficient number of workers?

Suppose that the real wage remained unchanged between year 1 and 2 but the nominal wage was $20 in year 1 and $18 in year 2.How was the price level affected?

Suppose a recessionary gap exists and resource prices are NOT flexible downward.What will be the effect on the short-run aggregate supply curve?

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision, how can they offset the initial shift?

-Refer to the graph in the exhibit.If the economy is at point H, what is the gap?

Given a long-run aggregate supply curve, what would the aggregate demand curve illustrate?

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