Question 1

A recessionary gap develops:​

Accepted Answer

A) when actual output exceeds potential output. 
B) when resource prices are "sticky" upward. 
C) only when the economy is in recession. 
D) only when GDP grows by more than 4 percent. 
E) only when unemployment exceeds its natural rate. 
A) when actual output exceeds potential output. 
B) when resource prices are "sticky" upward. 
C) only when the economy is in recession. 
D) only when GDP grows by more than 4 percent. 
E) only when unemployment exceeds its natural rate.

Question 2

Which of the following is true of a recessionary gap?​

Accepted Answer

A) It develops when the expected price level is less than the actual price level. 
B) In the long run,this gap closes when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output is greater than the economy's potential output. 
D) In the long run,this gap closes when the short-run aggregate supply curve shifts rightward. 
E) In the long run,this gap closes when the aggregate demand curve shifts rightward. 
A) It develops when the expected price level is less than the actual price level. 
B) In the long run,this gap closes when resource suppliers negotiate lower resource payments. 
C) It measures the amount by which actual output is greater than the economy's potential output. 
D) In the long run,this gap closes when the short-run aggregate supply curve shifts rightward. 
E) In the long run,this gap closes when the aggregate demand curve shifts rightward.

Question 3

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 4

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):​ ​
Figure 10.3

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) decrease in the 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) decrease in the aggregate quantity demanded.

Question 5

If resource prices are "sticky" downward and a recessionary gap develops,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) become a horizontal straight line. 
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) become a horizontal straight line. 
D) not shift rightward to return the economy to its potential output. 
E) become the long-run aggregate supply curve.

Question 6

In the long run,an economy will produce its potential output if:​

Accepted Answer

A) workers mistakenly believe that nominal wages equal real wages. 
B) the expectations of workers and firms are the same in the long and short run. 
C) wages and prices are sufficiently flexible. 
D) the price level is high. 
E) the price level is low. 
A) workers mistakenly believe that nominal wages equal real wages. 
B) the expectations of workers and firms are the same in the long and short run. 
C) wages and prices are sufficiently flexible. 
D) the price level is high. 
E) the price level is low.

Question 7

Given a downward-sloping aggregate demand curve,if short-run aggregate supply increases,real GDP must increase and nominal GDP must fall.​

Accepted Answer

A) True 
 B)False

Question 8

Which of these is an advantage of long-term contracts in resource markets?​

Accepted Answer

A) Long-term contracts decrease the duration of recessionary gaps. 
B) Long-term contracts reduce unemployment below its natural rate. 
C) Long-term contracts help avoid recession in an economy. 
D) Long-term contracts increase the flexibility of nominal wages. 
E) Long-term contracts reduce the average cost of negotiation. 
A) Long-term contracts decrease the duration of recessionary gaps. 
B) Long-term contracts reduce unemployment below its natural rate. 
C) Long-term contracts help avoid recession in an economy. 
D) Long-term contracts increase the flexibility of nominal wages. 
E) Long-term contracts reduce the average cost of negotiation.

Question 9

The figure below shows the short-run aggregate demand and supply curves of an economy.In this figure,the distance between Y1 and Y2 represents:​ ​
Figure 10.2

Accepted Answer

A) an expansionary gap. 
B) a recessionary gap. 
C) a cost-push inflation. 
D) the natural rate of unemployment. 
E) the full employment output. 
A) an expansionary gap. 
B) a recessionary gap. 
C) a cost-push inflation. 
D) the natural rate of unemployment. 
E) the full employment output.

Question 10

Wage rates are typically flexible upward but "sticky" downward.​

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true if marginal costs increase at a slow rate as output increases?​

Accepted Answer

A) The short-run aggregate supply curve is relatively steep. 
B) The short-run aggregate supply curve becomes vertical. 
C) The short-run aggregate supply curve is relatively flat. 
D) The long-run aggregate supply curve becomes horizontal. 
E) The long-run aggregate supply curve becomes downward sloping. 
A) The short-run aggregate supply curve is relatively steep. 
B) The short-run aggregate supply curve becomes vertical. 
C) The short-run aggregate supply curve is relatively flat. 
D) The long-run aggregate supply curve becomes horizontal. 
E) The long-run aggregate supply curve becomes downward sloping.

Question 12

The figure below shows equilibrium in an aggregate demand-aggregate supply model.Which of these statements is true if the economy described by this figure is at point M on SRAS100?​ ​
Figure 10.4

Accepted Answer

A) The actual price level is lower than expected with a $200 billion expansionary gap. 
B) The actual price level is lower than expected with a $200 billion recessionary gap. 
C) The actual price level is higher than expected with a $200 billion recessionary gap. 
D) The actual price level is higher than expected with a $200 billion expansionary gap. 
E) The economy is in equilibrium in the short run and the long run. 
A) The actual price level is lower than expected with a $200 billion expansionary gap. 
B) The actual price level is lower than expected with a $200 billion recessionary gap. 
C) The actual price level is higher than expected with a $200 billion recessionary gap. 
D) The actual price level is higher than expected with a $200 billion expansionary gap. 
E) The economy is in equilibrium in the short run and the long run.

Question 13

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 14

The amount by which actual output falls short of potential output is called:​

Accepted Answer

A) a deadweight loss. 
B) real GDP. 
C) a recessionary gap. 
D) the full-employment output. 
E) an expansionary gap. 
A) a deadweight loss. 
B) real GDP. 
C) a recessionary gap. 
D) the full-employment output. 
E) an expansionary gap.

Question 15

If the expected price level exceeds the actual price level in an economy,_____.​

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 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 raise prices in the short run.

Question 16

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?​

Accepted Answer

A) Output decreases,and the price level increases. 
B) Inflation decreases,and unemployment rises. 
C) Both the equilibrium output and the price level increase. 
D) Both the equilibrium output and the price level decrease. 
E) Inflation rises,and unemployment decreases​ 
A) Output decreases,and the price level increases. 
B) Inflation decreases,and unemployment rises. 
C) Both the equilibrium output and the price level increase. 
D) Both the equilibrium output and the price level decrease. 
E) Inflation rises,and unemployment decreases​

Question 17

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?​

Accepted Answer

A) Cyclical unemployment only 
B) Structural unemployment only​ 
C) Frictional,cyclical,and seasonal unemployment only​ 
D) Frictional,seasonal,and structural unemployment only​ 
E) Seasonal unemployment only​ 
A) Cyclical unemployment only 
B) Structural unemployment only​ 
C) Frictional,cyclical,and seasonal unemployment only​ 
D) Frictional,seasonal,and structural unemployment only​ 
E) Seasonal unemployment only​

Question 18

An expansionary gap is equal to:​

Accepted Answer

A) real GDP minus nominal GDP. 
B) nominal GDP minus real GDP. 
C) the actual short-run output minus potential output. 
D) the actual price level minus expected price level. 
E) the actual long-run real GDP minus actual short-run disposable income. 
A) real GDP minus nominal GDP. 
B) nominal GDP minus real GDP. 
C) the actual short-run output minus potential output. 
D) the actual price level minus expected price level. 
E) the actual long-run real GDP minus actual short-run disposable income.

Question 19

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 20

When the economy's actual price level exceeds the expected price level in the short run,:​

Accepted Answer

A) the real wages of workers decline. 
B) the nominal wages of workers increase. 
C) firms decrease output below the potential level. 
D) the economy produces the natural rate of output. 
E) cyclical unemployment in the economy falls to zero. 
A) the real wages of workers decline. 
B) the nominal wages of workers increase. 
C) firms decrease output below the potential level. 
D) the economy produces the natural rate of output. 
E) cyclical unemployment in the economy falls to zero.

A recessionary gap develops:

Which of the following is true of a recessionary gap?

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

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n): Figure 10.3

If resource prices are "sticky" downward and a recessionary gap develops,the short-run aggregate supply curve will:

In the long run,an economy will produce its potential output if:

Given a downward-sloping aggregate demand curve,if short-run aggregate supply increases,real GDP must increase and nominal GDP must fall.

Which of these is an advantage of long-term contracts in resource markets?

The figure below shows the short-run aggregate demand and supply curves of an economy.In this figure,the distance between Y₁ and Y₂ represents: Figure 10.2

Wage rates are typically flexible upward but "sticky" downward.

Which of the following is true if marginal costs increase at a slow rate as output increases?

The figure below shows equilibrium in an aggregate demand-aggregate supply model.Which of these statements is true if the economy described by this figure is at point M on SRAS₁₀₀? Figure 10.4

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

The amount by which actual output falls short of potential output is called:

If the expected price level exceeds the actual price level in an economy,_____.

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

An expansionary gap is equal to:

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

When the economy's actual price level exceeds the expected price level in the short run,:

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Exam 10: Aggregate Supply