Question 1

If a contractionary gap exists and resource prices are not flexible downward, the short-run aggregate supply curve will

Accepted Answer

A) shift leftward to return the economy to its potential output 
B) shift rightward to return the economy to its potential output 
C) not shift leftward to return the economy to its potential output 
D) not shift rightward to return the economy to its potential output 
E) become the long-run aggregate supply curve 
A) shift leftward to return the economy to its potential output 
B) shift rightward to return the economy to its potential output 
C) not shift leftward to return the economy to its potential output 
D) not shift rightward to return the economy to its potential output 
E) become the long-run aggregate supply curve

Question 2

If workers and other resource suppliers negotiate higher resource payments, which of the following is true?

Accepted Answer

A) The long-run aggregate supply curve will shift rightward. 
B) There will be a leftward movement along a fixed short-run aggregate supply curve. 
C) The long-run aggregate supply curve will shift leftward. 
D) The short-run aggregate supply curve will shift rightward. 
E) Higher resource payments will cause the price level to rise. 
A) The long-run aggregate supply curve will shift rightward. 
B) There will be a leftward movement along a fixed short-run aggregate supply curve. 
C) The long-run aggregate supply curve will shift leftward. 
D) The short-run aggregate supply curve will shift rightward. 
E) Higher resource payments will cause the price level to rise.

Question 3

An increase in short-run aggregate supply that increases the price level will increase the inflation rate as well.

Accepted Answer

A) True 
 B)False

Question 4

The expected price level is assumed to be constant along a given short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) actual output can equal potential output 
B) cyclical unemployment can exist 
C) structural unemployment can exist 
D) frictional unemployment can exist 
E) real and nominal GDP can differ 
A) actual output can equal potential output 
B) cyclical unemployment can exist 
C) structural unemployment can exist 
D) frictional unemployment can exist 
E) real and nominal GDP can differ

Question 6

The aggregate supply curve reflects the relationship between the

Accepted Answer

A) price of a particular good and the quantity supplied by all firms producing that good 
B) price of a particular good and the quantity supplied by the aggregate economy 
C) price level and the quantity of all goods supplied in the economy 
D) price level and the quantity purchased of all goods in the economy 
E) price level and investment spending 
A) price of a particular good and the quantity supplied by all firms producing that good 
B) price of a particular good and the quantity supplied by the aggregate economy 
C) price level and the quantity of all goods supplied in the economy 
D) price level and the quantity purchased of all goods in the economy 
E) price level and investment spending

Question 7

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year, real wages will

Accepted Answer

A) increase by 3 percent per year 
B) increase by 5 percent per year 
C) increase by 2 percent per year 
D) decrease by 5 percent per year 
E) decrease by 3 percent per year 
A) increase by 3 percent per year 
B) increase by 5 percent per year 
C) increase by 2 percent per year 
D) decrease by 5 percent per year 
E) decrease by 3 percent per year

Question 8

A wage in dollars measured by the goods and services the dollars buy is called the

Accepted Answer

A) real wage 
B) imaginary wage 
C) inflationary wage 
D) nominal wage 
E) normal wage 
A) real wage 
B) imaginary wage 
C) inflationary wage 
D) nominal wage 
E) normal wage

Question 9

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

Accepted Answer

A) a decline in the length of the average workweek 
B) an improvement in technology 
C) a drought 
D) an increase in aggregate demand 
E) an increase in the minimum wage 
A) a decline in the length of the average workweek 
B) an improvement in technology 
C) a drought 
D) an increase in aggregate demand 
E) an increase in the minimum wage

Question 10

Exhibit 11-7  
-The graph in Exhibit 11-7 shows a(n)

Accepted Answer

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

Question 11

The short-run aggregate supply curve slopes upward because quantity supplied

Accepted Answer

A) increases when cost per unit falls 
B) decreases when cost per unit falls 
C) increases when the price level increases 
D) increases when GDP decreases 
E) decreases as profit per unit increases 
A) increases when cost per unit falls 
B) decreases when cost per unit falls 
C) increases when the price level increases 
D) increases when GDP decreases 
E) decreases as profit per unit increases

Question 12

Exhibit 11-1
  
-Given aggregate demand and aggregate supply schedule #3 in Exhibit 11-1, the equilibrium level of output and price level are $5.5 and 140.

Accepted Answer

A) True 
 B)False

Question 13

Between 1994 and 2004, Jack's salary increased from $100,000 to $200,000 per year and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?

Accepted Answer

A) his real income and money income have both increased 
B) his real income increased and money income decreased 
C) his real income and money income both decreased 
D) his real income decreased and money income increased 
E) his real income and money income remained unchanged 
A) his real income and money income have both increased 
B) his real income increased and money income decreased 
C) his real income and money income both decreased 
D) his real income decreased and money income increased 
E) his real income and money income remained unchanged

Question 14

Given implicit or explicit resource price agreements, if the actual price level is below the expected price level, the

Accepted Answer

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

Question 15

Exhibit 11-4  
-The shift from AS to AS' in Exhibit 11-4 would occur when the actual price level is higher than expectations.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true of an expansionary gap?

Accepted Answer

A) It develops when the expected price level exceeds the actual price level. 
B) In the long run, this gap will close when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output falls short of the economy's potential. 
D) In the long run, this gap will close when the short-run aggregate supply curve shifts rightward. 
E) In the long run, this gap will close when resource suppliers negotiate higher resource payments. 
A) It develops when the expected price level exceeds the actual price level. 
B) In the long run, this gap will close when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output falls short of the economy's potential. 
D) In the long run, this gap will close when the short-run aggregate supply curve shifts rightward. 
E) In the long run, this gap will close when resource suppliers negotiate higher resource payments.

Question 17

Which of the following is true in the long run?

Accepted Answer

A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is horizontal. 
C) The actual price level is less than the expected price level. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the aggregate demand curve. 
A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is horizontal. 
C) The actual price level is less than the expected price level. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the aggregate demand curve.

Question 18

Which of the following is true in the long run?

Accepted Answer

A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is horizontal. 
C) The actual price level and the expected price level are equal. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the long-run aggregate supply curve. 
A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is horizontal. 
C) The actual price level and the expected price level are equal. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the long-run aggregate supply curve.

Question 19

Exhibit 11-11  
-Refer to Exhibit 11-11. Which point represents short-run equilibrium?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) e 
A) a 
B) b 
C) c 
D) d 
E) e

Question 20

In constructing a short-run aggregate supply curve, we assume that the goal of business is to

Accepted Answer

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

Exam 11: Aggregate Supply

If a contractionary gap exists and resource prices are not flexible downward, the short-run aggregate supply curve will

If workers and other resource suppliers negotiate higher resource payments, which of the following is true?

An increase in short-run aggregate supply that increases the price level will increase the inflation rate as well.

The expected price level is assumed to be constant along a given short-run aggregate supply curve.

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

The aggregate supply curve reflects the relationship between the

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year, real wages will

A wage in dollars measured by the goods and services the dollars buy is called the

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

Exhibit 11-7 -The graph in Exhibit 11-7 shows a(n)

The short-run aggregate supply curve slopes upward because quantity supplied

Exhibit 11-1 -Given aggregate demand and aggregate supply schedule #3 in Exhibit 11-1, the equilibrium level of output and price level are $5.5 and 140.

Between 1994 and 2004, Jack's salary increased from $100,000 to $200,000 per year and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?

Given implicit or explicit resource price agreements, if the actual price level is below the expected price level, the

Exhibit 11-4 -The shift from AS to AS' in Exhibit 11-4 would occur when the actual price level is higher than expectations.

Which of the following is true of an expansionary gap?

Which of the following is true in the long run?

Which of the following is true in the long run?

Exhibit 11-11 -Refer to Exhibit 11-11. Which point represents short-run equilibrium?

In constructing a short-run aggregate supply curve, we assume that the goal of business is to

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