Question 1

If nominal wages are sticky in the downward direction,

Accepted Answer

A) unemployment may persist for long periods of time 
B) shortages of labor may persist for long periods of time 
C) increases in real wages will happen too quickly to affect unemployment 
D) nominal wage increases will reduce the price level 
E) decreases in nominal wages will increase the inflation rate 
A) unemployment may persist for long periods of time 
B) shortages of labor may persist for long periods of time 
C) increases in real wages will happen too quickly to affect unemployment 
D) nominal wage increases will reduce the price level 
E) decreases in nominal wages will increase the inflation rate

Question 2

Fixed resource prices help explain why firms

Accepted Answer

A) increase output in the short run when the price level increases 
B) keep production levels constant in the short run when the price level decreases 
C) sell output in the short run at fixed prices 
D) increase output in the long run when the price level increases 
E) decrease production when nominal wages fall in the long run 
A) increase output in the short run when the price level increases 
B) keep production levels constant in the short run when the price level decreases 
C) sell output in the short run at fixed prices 
D) increase output in the long run when the price level increases 
E) decrease production when nominal wages fall in the long run

Question 3

Aggregate supply is the relationship between aggregate demand and the quantities of aggregate output firms are willing and able to produce, other things constant.

Accepted Answer

A) True 
 B)False

Question 4

Given the aggregate demand curve, an increase in the supply of a productive resource will

Accepted Answer

A) increase output but leave prices unchanged 
B) decrease both output and prices 
C) increase the price level and decrease output 
D) decrease the price level and increase output 
E) increase the price level but leave output unchanged 
A) increase output but leave prices unchanged 
B) decrease both output and prices 
C) increase the price level and decrease output 
D) decrease the price level and increase output 
E) increase the price level but leave output unchanged

Question 5

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

Accepted Answer

A) an increase in the average workweek 
B) an improvement in technology 
C) a civil war 
D) a decrease in aggregate demand 
E) accelerated depreciation allowances to encourage capital formation 
A) an increase in the average workweek 
B) an improvement in technology 
C) a civil war 
D) a decrease in aggregate demand 
E) accelerated depreciation allowances to encourage capital formation

Question 6

As an expansionary gap is closed in the long run,

Accepted Answer

A) nominal and real GDP decline 
B) nominal and real GDP increase 
C) nominal GDP increases but real GDP declines 
D) nominal GDP declines but real GDP increases 
E) real GDP declines, but nominal GDP can increase, decrease, or remain the same 
A) nominal and real GDP decline 
B) nominal and real GDP increase 
C) nominal GDP increases but real GDP declines 
D) nominal GDP declines but real GDP increases 
E) real GDP declines, but nominal GDP can increase, decrease, or remain the same

Question 7

Among the reasons firms find it profitable to expand output in the short run when the price level is rising faster than expected is that

Accepted Answer

A) all firms' costs are contractually fixed 
B) prices for firms' output are rising with the price level 
C) firms are interested in minimizing cost per unit, not total profits 
D) all firms' costs are variable 
E) the quantity of resources available to the economy is fixed 
A) all firms' costs are contractually fixed 
B) prices for firms' output are rising with the price level 
C) firms are interested in minimizing cost per unit, not total profits 
D) all firms' costs are variable 
E) the quantity of resources available to the economy is fixed

Question 8

An expansionary gap is closed in the long run by a(n)

Accepted Answer

A) rightward shift of the short-run aggregate supply curve 
B) leftward shift of the short-run aggregate supply curve 
C) movement to the right along a fixed short-run aggregate supply curve 
D) increase in aggregate demand 
E) decrease in aggregate demand 
A) rightward shift of the short-run aggregate supply curve 
B) leftward shift of the short-run aggregate supply curve 
C) movement to the right along a fixed short-run aggregate supply curve 
D) increase in aggregate demand 
E) decrease in aggregate demand

Question 9

A wage rate above what is necessary to attract a sufficient number of workers is known as a(n)

Accepted Answer

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

Question 10

The key resource underlying aggregate supply is

Accepted Answer

A) economic institutions 
B) production incentives 
C) labor 
D) technology 
E) natural resources 
A) economic institutions 
B) production incentives 
C) labor 
D) technology 
E) natural resources

Question 11

Which of the following is true of a beneficial supply shock?

Accepted Answer

A) It could lead to a lower price level. 
B) If the economy were initially in equilibrium, such a shock would create a contractionary gap. 
C) It will permanently decrease the economy's price level. 
D) It will cause the aggregate demand curve to shift rightward. 
E) It will cause the aggregate demand curve to shift leftward. 
A) It could lead to a lower price level. 
B) If the economy were initially in equilibrium, such a shock would create a contractionary gap. 
C) It will permanently decrease the economy's price level. 
D) It will cause the aggregate demand curve to shift rightward. 
E) It will cause the aggregate demand curve to shift leftward.

Question 12

If the actual price level is higher than the expected price level, the economy will expand in the short run.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true about real and nominal wages?

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

An adverse supply shock could increase both the price level and nominal GDP.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) output $7.0, price level 110 
B) output $6.5, price level 120 
C) output $6.0, price level 130 
D) output $5.0, price level 150 
E) output $5.5, price level 140 
A) output $7.0, price level 110 
B) output $6.5, price level 120 
C) output $6.0, price level 130 
D) output $5.0, price level 150 
E) output $5.5, price level 140

Question 17

Potential output depends on all of the following except one. Which is the exception?

Accepted Answer

A) the supply of labor 
B) labor productivity 
C) household choices regarding labor and leisure 
D) the technology in current use 
E) the number of consumers in the market 
A) the supply of labor 
B) labor productivity 
C) household choices regarding labor and leisure 
D) the technology in current use 
E) the number of consumers in the market

Question 18

If the price level rises by 4 percent and the nominal wage rises 6 percent, the real wage

Accepted Answer

A) falls by 2 percent 
B) falls by 10 percent 
C) rises by 2 percent 
D) rises by 10 percent 
E) remains constant 
A) falls by 2 percent 
B) falls by 10 percent 
C) rises by 2 percent 
D) rises by 10 percent 
E) remains constant

Question 19

Which of the following would be strong evidence that an expansionary gap exists?

Accepted Answer

A) Rapid inflation during a period when plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising is higher than usual, and the consumer price index is up more than expected. 
D) Inflation has slowed markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is falling. 
A) Rapid inflation during a period when plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising is higher than usual, and the consumer price index is up more than expected. 
D) Inflation has slowed markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is falling.

Question 20

The capital stock increases

Accepted Answer

A) whenever money in circulation is decreased 
B) whenever gross investment is positive 
C) whenever gross investment is negative 
D) only if net investment is positive 
E) whenever gross investment is zero 
A) whenever money in circulation is decreased 
B) whenever gross investment is positive 
C) whenever gross investment is negative 
D) only if net investment is positive 
E) whenever gross investment is zero

Exam 11: Aggregate Supply

If nominal wages are sticky in the downward direction,

Fixed resource prices help explain why firms

Aggregate supply is the relationship between aggregate demand and the quantities of aggregate output firms are willing and able to produce, other things constant.

Given the aggregate demand curve, an increase in the supply of a productive resource will

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

As an expansionary gap is closed in the long run,

Among the reasons firms find it profitable to expand output in the short run when the price level is rising faster than expected is that

An expansionary gap is closed in the long run by a(n)

A wage rate above what is necessary to attract a sufficient number of workers is known as a(n)

The key resource underlying aggregate supply is

Which of the following is true of a beneficial supply shock?

If the actual price level is higher than the expected price level, the economy will expand in the short run.

Which of the following is true about real and nominal wages?

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

An adverse supply shock could increase both the price level and nominal GDP.

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

Potential output depends on all of the following except one. Which is the exception?

If the price level rises by 4 percent and the nominal wage rises 6 percent, the real wage

Which of the following would be strong evidence that an expansionary gap exists?

The capital stock increases

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