Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Aggregate supply describes the relationship between

Accepted Answer

A) price level and real GDP 
B) nominal and real GDP 
C) real GDP and the level of production 
D) nominal GDP and the level of output 
E) the level of output and income 
A) price level and real GDP 
B) nominal and real GDP 
C) real GDP and the level of production 
D) nominal GDP and the level of output 
E) the level of output and income

Question 3

As macroeconomic output expands, the cost of additional output increases.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would shift the LRAS curve to the right?

Accepted Answer

A) a decline in the size of the labor force 
B) a reduction in the quality of the labor force 
C) a reduction in the cost of using computers 
D) an increase in the price level 
E) an increase in aggregate demand 
A) a decline in the size of the labor force 
B) a reduction in the quality of the labor force 
C) a reduction in the cost of using computers 
D) an increase in the price level 
E) an increase in aggregate demand

Question 5

Stagflation is defined as

Accepted Answer

A) decreased output accompanied by a higher price level 
B) decreased output accompanied by a lower price level 
C) increased output accompanied by a lower price level 
D) increased output accompanied by a higher price level 
E) stagnation in the rate of inflation (i.e., no appreciable change in the rate of inflation for a year or more) 
A) decreased output accompanied by a higher price level 
B) decreased output accompanied by a lower price level 
C) increased output accompanied by a lower price level 
D) increased output accompanied by a higher price level 
E) stagnation in the rate of inflation (i.e., no appreciable change in the rate of inflation for a year or more)

Question 6

If global pollution causes climatic changes that permanently harm crop production worldwide, aggregate supply and demand analysis would lead us to expect

Accepted Answer

A) increases in the price level 
B) decreases in the price level 
C) outward shifts of the aggregate demand and supply curves 
D) a leftward shift of the aggregate demand curve along a vertical aggregate supply curve 
E) an increase in the potential level of real GDP 
A) increases in the price level 
B) decreases in the price level 
C) outward shifts of the aggregate demand and supply curves 
D) a leftward shift of the aggregate demand curve along a vertical aggregate supply curve 
E) an increase in the potential level of real GDP

Question 7

In long-run equilibrium,

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 price levels can exceed expected price levels 
E) expected price levels can exceed actual price levels 
A) actual output can exceed potential output 
B) potential output can exceed actual output 
C) actual output must equal potential output 
D) actual price levels can exceed expected price levels 
E) expected price levels can exceed actual price levels

Question 8

Exhibit 11-3  
-Consider Exhibit 11-3. In this situation, long-run equilibrium would be established by a(n)

Accepted Answer

A) increase of short-run aggregate supply to close the expansionary gap 
B) decrease of short-run aggregate supply to close the expansionary gap 
C) decrease of short-run aggregate supply to close the contractionary gap 
D) increase of short-run aggregate supply to close the contractionary gap 
E) rightward shift of the aggregate demand curve 
A) increase of short-run aggregate supply to close the expansionary gap 
B) decrease of short-run aggregate supply to close the expansionary gap 
C) decrease of short-run aggregate supply to close the contractionary gap 
D) increase of short-run aggregate supply to close the contractionary gap 
E) rightward shift of the aggregate demand curve

Question 9

If an economy is at its potential output level, which of the following is not true?

Accepted Answer

A) The economy is at its full-employment output level. 
B) Unemployment is at the natural level. 
C) The price level is zero. 
D) The output level being produced can be sustained indefinitely given the economy's resources and technology. 
E) The only unemployment is frictional, structural, or seasonal. 
A) The economy is at its full-employment output level. 
B) Unemployment is at the natural level. 
C) The price level is zero. 
D) The output level being produced can be sustained indefinitely given the economy's resources and technology. 
E) The only unemployment is frictional, structural, or seasonal.

Question 10

As actual output rises above the potential level, which of the following must be true?

Accepted Answer

A) more resources become unemployed 
B) prices remain constant 
C) real GDP rises 
D) nominal GDP remains constant 
E) production falls 
A) more resources become unemployed 
B) prices remain constant 
C) real GDP rises 
D) nominal GDP remains constant 
E) production falls

Question 11

If the actual price level is less than 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, because they are making less profit than they had expected, will increase 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, because they are making less profit than they had expected, will increase 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 12

Exhibit 11-3  
-In Exhibit 11-3, 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) the natural rate of unemployment 
E) a decrease in potential output 
A) an expansionary gap 
B) a contractionary gap 
C) an increase in potential output 
D) the natural rate of unemployment 
E) a decrease in potential output

Question 13

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

Accepted Answer

A) businesses cut back production 
B) the potential output level decreases 
C) initially, the short-run aggregate supply curve shifts leftward; later, there is a downward movement along that curve 
D) initially, the short-run aggregate supply curve shifts leftward; later, there is an upward movement along that curve 
E) an expansionary gap develops 
A) businesses cut back production 
B) the potential output level decreases 
C) initially, the short-run aggregate supply curve shifts leftward; later, there is a downward movement along that curve 
D) initially, the short-run aggregate supply curve shifts leftward; later, there is an upward movement along that curve 
E) an expansionary gap develops

Question 14

Which of the following does not influence the position of the long-run aggregate supply curve?

Accepted Answer

A) the quantity of raw materials available for production 
B) the quantity of capital 
C) the quality of the labor force 
D) the actual price level 
E) the size of the labor force 
A) the quantity of raw materials available for production 
B) the quantity of capital 
C) the quality of the labor force 
D) the actual price level 
E) the size of the labor force

Question 15

One explanation for the persistently high unemployment rates in Europe during the 1990s is that

Accepted Answer

A) unemployment rates have always been high in Europe 
B) the United States has "exported" unemployment through its economic policies 
C) the labor supply in Europe increased faster than labor demand increased 
D) the labor supply in Europe increased while labor demand decreased 
E) European labor demand decreased because of legislation that makes hiring a worker an almost irreversible decision 
A) unemployment rates have always been high in Europe 
B) the United States has "exported" unemployment through its economic policies 
C) the labor supply in Europe increased faster than labor demand increased 
D) the labor supply in Europe increased while labor demand decreased 
E) European labor demand decreased because of legislation that makes hiring a worker an almost irreversible decision

Question 16

An adverse supply shock would shift the

Accepted Answer

A) short-run aggregate supply curve outward but not the long-run aggregate supply curve 
B) long-run aggregate supply curve outward but not the short-run aggregate supply curve 
C) long-run aggregate supply curve inward but not the short-run aggregate supply curve 
D) short-run aggregate supply curve inward but not the long-run aggregate supply curve 
E) long-run and short-run aggregate supply curves inward 
A) short-run aggregate supply curve outward but not the long-run aggregate supply curve 
B) long-run aggregate supply curve outward but not the short-run aggregate supply curve 
C) long-run aggregate supply curve inward but not the short-run aggregate supply curve 
D) short-run aggregate supply curve inward but not the long-run aggregate supply curve 
E) long-run and short-run aggregate supply curves inward

Question 17

Exhibit 11-6  
-In Exhibit 11-6, at income level Y1

Accepted Answer

A) potential output is less than actual output 
B) there is an expansionary gap 
C) the price level will rise 
D) aggregate supply will fall to restore equilibrium 
E) the actual unemployment rate is greater than the natural rate of unemployment 
A) potential output is less than actual output 
B) there is an expansionary gap 
C) the price level will rise 
D) aggregate supply will fall to restore equilibrium 
E) the actual unemployment rate is greater than the natural rate of unemployment

Question 18

Aggregate supply reflects billions of production decisions made by

Accepted Answer

A) consumers when they decide which products to purchase 
B) households and firms, because they each demand goods and services 
C) the largest firms and largest households 
D) households, which demand resources, and firms, which supply resources 
E) resource suppliers and firms 
A) consumers when they decide which products to purchase 
B) households and firms, because they each demand goods and services 
C) the largest firms and largest households 
D) households, which demand resources, and firms, which supply resources 
E) resource suppliers and firms

Question 19

If the expected price level exceeds the actual price level,

Accepted Answer

A) firms increase production in the short run 
B) firms decrease production in the short run 
C) firms maintain production in the short run but increase prices 
D) firms maintain production in the short run but decrease prices 
E) firms increase production and raise prices in the short run 
A) firms increase production in the short run 
B) firms decrease production in the short run 
C) firms maintain production in the short run but increase prices 
D) firms maintain production in the short run but decrease prices 
E) firms increase production and raise prices in the short run

Question 20

If the expected price level exceeds the actual price level, then

Accepted Answer

A) potential output falls 
B) real GDP may fall below potential output 
C) potential output increases 
D) nominal wages increase 
E) the inflation rate accelerates 
A) potential output falls 
B) real GDP may fall below potential output 
C) potential output increases 
D) nominal wages increase 
E) the inflation rate accelerates

Exam 11: Aggregate Supply

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

Aggregate supply describes the relationship between

As macroeconomic output expands, the cost of additional output increases.

Which of the following would shift the LRAS curve to the right?

Stagflation is defined as

If global pollution causes climatic changes that permanently harm crop production worldwide, aggregate supply and demand analysis would lead us to expect

In long-run equilibrium,

Exhibit 11-3 -Consider Exhibit 11-3. In this situation, long-run equilibrium would be established by a(n)

If an economy is at its potential output level, which of the following is not true?

As actual output rises above the potential level, which of the following must be true?

If the actual price level is less than the expected price level reflected in long-term contracts,

Exhibit 11-3 -In Exhibit 11-3, the distance between Y1 and Y2 is called

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

Which of the following does not influence the position of the long-run aggregate supply curve?

One explanation for the persistently high unemployment rates in Europe during the 1990s is that

An adverse supply shock would shift the

Exhibit 11-6 -In Exhibit 11-6, at income level Y1

Aggregate supply reflects billions of production decisions made by

If the expected price level exceeds the actual price level,

If the expected price level exceeds the actual price level, then

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 11-3 -In Exhibit 11-3, the distance between Y₁ and Y₂ is called

Exhibit 11-6 -In Exhibit 11-6, at income level Y₁