Question 1

If the expected price level falls below the actual price level,

Accepted Answer

A) the inflation rate must be negative 
B) the inflation rate must be positive 
C) production becomes less attractive to firms 
D) production becomes more attractive to firms 
E) the short-run aggregate supply curve is negatively sloped 
A) the inflation rate must be negative 
B) the inflation rate must be positive 
C) production becomes less attractive to firms 
D) production becomes more attractive to firms 
E) the short-run aggregate supply curve is negatively sloped

Question 2

Which of the following would cause the short-run aggregate supply curve to shift leftward?

Accepted Answer

A) a drop in energy prices 
B) a drop in the actual price level 
C) workers opting for more leisure time and less time on the job 
D) new investment spending that is greater than depreciation of the capital stock 
E) a technological breakthrough with widespread practical applications that occurs in the microcomputer industry 
A) a drop in energy prices 
B) a drop in the actual price level 
C) workers opting for more leisure time and less time on the job 
D) new investment spending that is greater than depreciation of the capital stock 
E) a technological breakthrough with widespread practical applications that occurs in the microcomputer industry

Question 3

Exhibit 11-6  
-In Exhibit 11-6, the distance between Y1 and Y2 is called

Accepted Answer

A) an expansionary gap 
B) a contractionary gap 
C) an increase in potential output 
D) a decrease in potential output 
E) the natural rate of unemployment 
A) an expansionary gap 
B) a contractionary gap 
C) an increase in potential output 
D) a decrease in potential output 
E) the natural rate of unemployment

Question 4

Exhibit 11-10  
-The graph in Exhibit 11-10 shows a(n)

Accepted Answer

A) increase in long-run aggregate supply 
B) increase in short-run aggregate supply 
C) decrease in short-run aggregate supply 
D) decrease in long-run aggregate supply 
E) increase in aggregate quantity demanded 
A) increase in long-run aggregate supply 
B) increase in short-run aggregate supply 
C) decrease in short-run aggregate supply 
D) decrease in long-run aggregate supply 
E) increase in aggregate quantity demanded

Question 5

Increases in the costs of production will shift the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 6

A rising price level in the short run may create an incentive for firms to increase production because

Accepted Answer

A) costs of production will increase 
B) total sales revenue will decrease 
C) profits will increase 
D) costs of production will increase faster than total revenue 
E) output prices are generally not fixed by contract whereas resource prices are 
A) costs of production will increase 
B) total sales revenue will decrease 
C) profits will increase 
D) costs of production will increase faster than total revenue 
E) output prices are generally not fixed by contract whereas resource prices are

Question 7

Exhibit 11-1
  
-Given aggregate demand and aggregate supply schedule #2 in Exhibit 11-1, the equilibrium output level and price level are $7.0 and 110

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 11-9  
-The movement shown in Exhibit 11-9 could be caused by

Accepted Answer

A) government policies to increase demand 
B) weather conditions causing worldwide crop failures 
C) an attempt by key resource producers to monopolize supply 
D) an increase in taxation or a decrease in government spending 
E) an increase in labor productivity 
A) government policies to increase demand 
B) weather conditions causing worldwide crop failures 
C) an attempt by key resource producers to monopolize supply 
D) an increase in taxation or a decrease in government spending 
E) an increase in labor productivity

Question 9

Suppose firms are continually surprised by higher-than-expected price levels. Which of the following might be true?

Accepted Answer

A) the consumer price index will rise 
B) potential output will increase 
C) potential output will decrease 
D) actual output will be less than potential output in the long run 
E) actual output will exceed potential output in the short run 
A) the consumer price index will rise 
B) potential output will increase 
C) potential output will decrease 
D) actual output will be less than potential output in the long run 
E) actual output will exceed potential output in the short run

Question 10

At the potential level of output, there is no structural unemployment.

Accepted Answer

A) True 
 B)False

Question 11

An increase in short-run aggregate supply could decrease nominal GDP.

Accepted Answer

A) True 
 B)False

Question 12

If the actual price level exceeds the expected price level reflected in long-term contracts,

Accepted Answer

A) firms will find production more profitable than they had expected and will increase the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
D) resource owners, because they are making a lower profit than they had expected, will decrease the quantity of output supplied 
E) unemployment will increase 
A) firms will find production more profitable than they had expected and will increase the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
D) resource owners, because they are making a lower profit than they had expected, will decrease the quantity of output supplied 
E) unemployment will increase

Question 13

In the long run, the price level is determined by aggregate supply.

Accepted Answer

A) True 
 B)False

Question 14

In the long run, but not in the short run,

Accepted Answer

A) cyclical unemployment can exist 
B) structural unemployment can exist 
C) frictional unemployment can exist 
D) the actual rate of unemployment equals the natural rate of unemployment 
E) actual output can exceed potential output 
A) cyclical unemployment can exist 
B) structural unemployment can exist 
C) frictional unemployment can exist 
D) the actual rate of unemployment equals the natural rate of unemployment 
E) actual output can exceed potential output

Question 15

Exhibit 11-8  
-If the economy is at point H in Exhibit 11-8, there is a(n)

Accepted Answer

A) expansionary gap of $300 billion (i.e., $0.3 trillion) 
B) contractionary gap of $300 billion 
C) contractionary gap of 10 
D) expansionary gap of 20 
E) expansionary gap of 10 
A) expansionary gap of $300 billion (i.e., $0.3 trillion) 
B) contractionary gap of $300 billion 
C) contractionary gap of 10 
D) expansionary gap of 20 
E) expansionary gap of 10

Question 16

If the actual price level turns out to be lower than expected,

Accepted Answer

A) resource suppliers lose because they receive lower real incomes 
B) potential output rises 
C) potential output falls 
D) firms earn greater profits because their costs decrease 
E) the unemployment rate will probably rise 
A) resource suppliers lose because they receive lower real incomes 
B) potential output rises 
C) potential output falls 
D) firms earn greater profits because their costs decrease 
E) the unemployment rate will probably rise

Question 17

An increase in the federal minimum wage would shift the long-run aggregate supply curve inward (to the left).

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 11-2  
-In Exhibit 11-2, a contractionary gap would be represented by the distance

Accepted Answer

A) Y1 - Y2 
B) Y1 - Y3 
C) Y2 - Y3 
D) P3 - P1 
E) P3 - P2 
A) Y1 - Y2 
B) Y1 - Y3 
C) Y2 - Y3 
D) P3 - P1 
E) P3 - P2

Question 19

An expansionary gap is 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) this period's nominal GDP minus last period's nominal GDP 
E) this period's real GDP minus last period's real GDP 
A) real GDP minus nominal GDP 
B) nominal GDP minus real GDP 
C) actual short-run output minus potential output 
D) this period's nominal GDP minus last period's nominal GDP 
E) this period's real GDP minus last period's real GDP

Question 20

Exhibit 11-9  
-The movement shown in Exhibit 11-9 could be caused by

Accepted Answer

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

Exam 11: Aggregate Supply

If the expected price level falls below the actual price level,

Which of the following would cause the short-run aggregate supply curve to shift leftward?

Exhibit 11-6 -In Exhibit 11-6, the distance between Y1 and Y2 is called

Exhibit 11-10 -The graph in Exhibit 11-10 shows a(n)

Increases in the costs of production will shift the short-run aggregate supply curve to the left.

A rising price level in the short run may create an incentive for firms to increase production because

Exhibit 11-1 -Given aggregate demand and aggregate supply schedule #2 in Exhibit 11-1, the equilibrium output level and price level are $7.0 and 110

Exhibit 11-9 -The movement shown in Exhibit 11-9 could be caused by

Suppose firms are continually surprised by higher-than-expected price levels. Which of the following might be true?

At the potential level of output, there is no structural unemployment.

An increase in short-run aggregate supply could decrease nominal GDP.

If the actual price level exceeds the expected price level reflected in long-term contracts,

In the long run, the price level is determined by aggregate supply.

In the long run, but not in the short run,

Exhibit 11-8 -If the economy is at point H in Exhibit 11-8, there is a(n)

If the actual price level turns out to be lower than expected,

An increase in the federal minimum wage would shift the long-run aggregate supply curve inward (to the left).

Exhibit 11-2 -In Exhibit 11-2, a contractionary gap would be represented by the distance

An expansionary gap is equal to

Exhibit 11-9 -The movement shown in Exhibit 11-9 could be caused by

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

Filters

Exhibit 11-6 -In Exhibit 11-6, the distance between Y₁ and Y₂ is called