Question 1

Which of the following is a true statement?

Accepted Answer

A)  Under normal conditions,there is a short-run trade-off between inflation and unemployment. 
B)  There is a long-run trade-off between inflation and unemployment. 
C)  The short-run Phillips Curve is vertical. 
D)  The long-run Phillips Curve is horizontal. 
A)  Under normal conditions,there is a short-run trade-off between inflation and unemployment. 
B)  There is a long-run trade-off between inflation and unemployment. 
C)  The short-run Phillips Curve is vertical. 
D)  The long-run Phillips Curve is horizontal.

Question 2

Demand-pull inflation and cost-push inflation are identical concepts because both involve lower unemployment rates and rising prices.

Accepted Answer

A) True 
 B)False

Question 3

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

Accepted Answer

A) True 
 B)False

Question 4

The traditional Phillips Curve suggests that,if government uses an expansionary fiscal policy to stimulate output and employment:

Accepted Answer

A)  unemployment may actually increase because of the crowding-out effect. 
B)  tax revenues may increase even though tax rates have been reduced. 
C)  deflation may result. 
D)  the natural rate of unemployment may fall. 
A)  unemployment may actually increase because of the crowding-out effect. 
B)  tax revenues may increase even though tax rates have been reduced. 
C)  deflation may result. 
D)  the natural rate of unemployment may fall.

Question 5

The natural rate of unemployment:

Accepted Answer

A)  can vary over time and defines the location of the long-run aggregate supply curve. 
B)  is constant over time and defines the location of the long-run aggregate supply curve. 
C)  varies over time in response to changes in aggregate demand. 
D)  is inversely related to the price level. 
A)  can vary over time and defines the location of the long-run aggregate supply curve. 
B)  is constant over time and defines the location of the long-run aggregate supply curve. 
C)  varies over time in response to changes in aggregate demand. 
D)  is inversely related to the price level.

Question 6

The traditional Phillips Curve suggests a trade-off between:

Accepted Answer

A)  price stability and income equality. 
B)  the level of unemployment and inflation. 
C)  unemployment and income equality. 
D)  economic growth and full employment. 
A)  price stability and income equality. 
B)  the level of unemployment and inflation. 
C)  unemployment and income equality. 
D)  economic growth and full employment.

Question 7

An adverse aggregate supply shock:

Accepted Answer

A)  automatically shifts the aggregate demand curve rightward. 
B)  causes the Phillips Curve to shift leftward and downward. 
C)  can be caused by a boost in the rate of growth of productivity. 
D)  can cause stagflation. 
A)  automatically shifts the aggregate demand curve rightward. 
B)  causes the Phillips Curve to shift leftward and downward. 
C)  can be caused by a boost in the rate of growth of productivity. 
D)  can cause stagflation.

Question 8

There is no trade-off between unemployment and inflation in the long run.

Accepted Answer

A) True 
 B)False

Question 9

The Laffer Curve shows the trade-off between the price level and tax rates.

Accepted Answer

A) True 
 B)False

Question 10

A rightward shift of the traditional Phillips Curve would suggest that:

Accepted Answer

A)  the productivity of labor increased. 
B)  the rate of inflation is now higher at each rate of unemployment. 
C)  cost-push inflation decreased. 
D)  the rate of inflation is now lower at each rate of unemployment. 
A)  the productivity of labor increased. 
B)  the rate of inflation is now higher at each rate of unemployment. 
C)  cost-push inflation decreased. 
D)  the rate of inflation is now lower at each rate of unemployment.

Question 11

Which of the following is a true statement?

Accepted Answer

A)  There is a long-run trade-off between inflation and unemployment. 
B)  There is no trade-off between inflation and unemployment in the long run. 
C)  The short-run Phillips Curve is horizontal. 
D)  The long-run Phillips Curve is horizontal. 
A)  There is a long-run trade-off between inflation and unemployment. 
B)  There is no trade-off between inflation and unemployment in the long run. 
C)  The short-run Phillips Curve is horizontal. 
D)  The long-run Phillips Curve is horizontal.

Question 12

Disinflation occurs when:

Accepted Answer

A)  the price level is falling. 
B)  investment plans exceed saving. 
C)  a speculative investment "bubble" is bursting. 
D)  the inflation rate is declining. 
A)  the price level is falling. 
B)  investment plans exceed saving. 
C)  a speculative investment "bubble" is bursting. 
D)  the inflation rate is declining.

Question 13

In the extended aggregate demand-aggregate supply model:

Accepted Answer

A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve. 
B)  the long-run aggregate supply curve is horizontal. 
C)  the level of real output is the same in the long run regardless of the location of the aggregate demand curve. 
D)  the short-run aggregate supply curve is downsloping. 
A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve. 
B)  the long-run aggregate supply curve is horizontal. 
C)  the level of real output is the same in the long run regardless of the location of the aggregate demand curve. 
D)  the short-run aggregate supply curve is downsloping.

Question 14

Answer the question on the basis of the following economic data for a hypothetical economy: $\begin{array}{c}
\begin{array}{c}
\
\
\
\text { Year } \
\hline 1997 \
1998 \
1999 \
2000
\end{array}
\begin{array}{c}
\text {Average}\
\text {Hourly}\
\text {Wage}\
\underline{\text {Rates}}\
\$ 6.40 \
6.72\
7.24\
8.02
\end{array}
\begin{array}{c}
\
\text {Index of}\
\text { Industrial}\
\underline{\text {Production}}\
197\
199\
196\
192
\end{array}

\begin{array}{c}
\
\
\text {Unemployment}\
\underline{\text {Rate}}\
 5.5 \% \
5.8\
7.2\
8.3
\end{array}

\begin{array}{c}
\
\text {Price}\
\text {Level}\
\underline{\text {Index}}\
130\
133\
139\
147
\end{array}

\begin{array}{c}
\
\text {Rate of}\
\text { Increase in}\
\underline{\text {Productivity}}\
3.0 \% \
2.9\
3.1\
2.8
\end{array}

\end{array}$
 Refer to the given data.It would be the appropriate stabilization policy to raise interest rates,raise taxes,and reduce government expenditures.

Accepted Answer

A) True 
 B)False

Question 15

Supply-side economist Arthur Laffer has argued that:

Accepted Answer

A)  there is no empirically proven relationship between tax rates and incentives. 
B)  large reductions in personal and corporate income taxes will increase aggregate supply much more than aggregate demand. 
C)  the only way to eliminate inflation is to increase taxes to induce a recession severe enough to eliminate inflationary expectations. 
D)  large cuts in income taxes will increase aggregate demand more than aggregate supply. 
A)  there is no empirically proven relationship between tax rates and incentives. 
B)  large reductions in personal and corporate income taxes will increase aggregate supply much more than aggregate demand. 
C)  the only way to eliminate inflation is to increase taxes to induce a recession severe enough to eliminate inflationary expectations. 
D)  large cuts in income taxes will increase aggregate demand more than aggregate supply.

Question 16

Answer the question on the basis of the following economic data for a hypothetical economy: $\begin{array}{c}
\begin{array}{c}
\
\
\
\text { Year } \
\hline 1997 \
1998 \
1999 \
2000
\end{array}
\begin{array}{c}
\text {Average}\
\text {Hourly}\
\text {Wage}\
\underline{\text {Rates}}\
\$ 6.40 \
6.72\
7.24\
8.02
\end{array}
\begin{array}{c}
\
\text {Index of}\
\text { Industrial}\
\underline{\text {Production}}\
197\
199\
196\
192
\end{array}

\begin{array}{c}
\
\
\text {Unemployment}\
\underline{\text {Rate}}\
 5.5 \% \
5.8\
7.2\
8.3
\end{array}

\begin{array}{c}
\
\text {Price}\
\text {Level}\
\underline{\text {Index}}\
130\
133\
139\
147
\end{array}

\begin{array}{c}
\
\text {Rate of}\
\text { Increase in}\
\underline{\text {Productivity}}\
3.0 \% \
2.9\
3.1\
2.8
\end{array}

\end{array}$
 Refer to the given data.There is evidence that cost-push inflationary pressure is present in this economy.

Accepted Answer

A) True 
 B)False

Question 17

An adverse aggregate supply shock could result from:

Accepted Answer

A)  a sharp rise in productivity. 
B)  a rapid rise in oil prices. 
C)  a decline in wages. 
D)  an appreciation of the dollar. 
A)  a sharp rise in productivity. 
B)  a rapid rise in oil prices. 
C)  a decline in wages. 
D)  an appreciation of the dollar.

Question 18

In 1993 the federal government boosted income tax rates.The change in tax revenue that occurred in the seven years that followed:

Accepted Answer

A)  supported the claims of supply-side economists and the Laffer Curve. 
B)  contradicted the claims of supply-side economists and the Laffer Curve. 
C)  caused productivity growth to slow. 
D)  significantly increased the size of the government's budget deficit. 
A)  supported the claims of supply-side economists and the Laffer Curve. 
B)  contradicted the claims of supply-side economists and the Laffer Curve. 
C)  caused productivity growth to slow. 
D)  significantly increased the size of the government's budget deficit.

Question 19

If government uses fiscal policy to restrain cost-push inflation,we can expect:

Accepted Answer

A)  the unemployment rate to rise. 
B)  the unemployment rate to fall. 
C)  the aggregate demand curve to shift rightward. 
D)  tax-rate declines and increases in government spending. 
A)  the unemployment rate to rise. 
B)  the unemployment rate to fall. 
C)  the aggregate demand curve to shift rightward. 
D)  tax-rate declines and increases in government spending.

Question 20

(Consider This)The ideas of economist Arthur Laffer became the centerpiece for tax policy during the:

Accepted Answer

A)  Ford administration. 
B)  Clinton administration. 
C)  Nixon administration. 
D)  Reagan administration. 
A)  Ford administration. 
B)  Clinton administration. 
C)  Nixon administration. 
D)  Reagan administration.

Which of the following is a true statement?

Demand-pull inflation and cost-push inflation are identical concepts because both involve lower unemployment rates and rising prices.

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

The traditional Phillips Curve suggests that,if government uses an expansionary fiscal policy to stimulate output and employment:

The natural rate of unemployment:

The traditional Phillips Curve suggests a trade-off between:

An adverse aggregate supply shock:

There is no trade-off between unemployment and inflation in the long run.

The Laffer Curve shows the trade-off between the price level and tax rates.

A rightward shift of the traditional Phillips Curve would suggest that:

Which of the following is a true statement?

Disinflation occurs when:

In the extended aggregate demand-aggregate supply model:

Supply-side economist Arthur Laffer has argued that:

An adverse aggregate supply shock could result from:

In 1993 the federal government boosted income tax rates.The change in tax revenue that occurred in the seven years that followed:

If government uses fiscal policy to restrain cost-push inflation,we can expect:

(Consider This)The ideas of economist Arthur Laffer became the centerpiece for tax policy during the:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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Exam 37: Extending the Analysis of Aggregate Supply

Which of the following is a true statement?

Demand-pull inflation and cost-push inflation are identical concepts because both involve lower unemployment rates and rising prices.

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

The traditional Phillips Curve suggests that,if government uses an expansionary fiscal policy to stimulate output and employment:

The natural rate of unemployment:

The traditional Phillips Curve suggests a trade-off between:

An adverse aggregate supply shock:

There is no trade-off between unemployment and inflation in the long run.

The Laffer Curve shows the trade-off between the price level and tax rates.

A rightward shift of the traditional Phillips Curve would suggest that:

Which of the following is a true statement?

Disinflation occurs when:

In the extended aggregate demand-aggregate supply model:

Supply-side economist Arthur Laffer has argued that:

An adverse aggregate supply shock could result from:

In 1993 the federal government boosted income tax rates.The change in tax revenue that occurred in the seven years that followed:

If government uses fiscal policy to restrain cost-push inflation,we can expect:

(Consider This)The ideas of economist Arthur Laffer became the centerpiece for tax policy during the:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters