Question 1

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 in the short run than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied​ 
C) firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied​ 
D) resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied​ 
E) unemployment will increase in the short run as firms will substitute labor with capital inputs​ 
A) firms will find production more profitable in the short run than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied​ 
C) firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied​ 
D) resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied​ 
E) unemployment will increase in the short run as firms will substitute labor with capital inputs​

Question 2

If resource prices are flexible,the long-run aggregate supply curve is vertical.​

Accepted Answer

A) True 
 B)False

Question 3

A recessionary gap is usually 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) rightward movement along a fixed short-run aggregate supply curve. 
D) decrease in aggregate demand. 
E) leftward movement along a fixed short-run aggregate supply curve. 
A) rightward shift of the short-run aggregate supply curve. 
B) leftward shift of the short-run aggregate supply curve. 
C) rightward movement along a fixed short-run aggregate supply curve. 
D) decrease in aggregate demand. 
E) leftward movement along a fixed short-run aggregate supply curve.

Question 4

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) an increase in the price level. 
B) a decrease in the price level. 
C) rightward shifts of the aggregate demand and aggregate supply curves. 
D) a leftward shift of the aggregate demand curve. 
E) an increase in the potential level of real GDP. 
A) an increase in the price level. 
B) a decrease in the price level. 
C) rightward shifts of the aggregate demand and aggregate supply curves. 
D) a leftward shift of the aggregate demand curve. 
E) an increase in the potential level of real GDP.

Question 5

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?​

Accepted Answer

A) Real wages will increase by 2 percent per year. 
B) Real wages will increase by 3 percent per year. 
C) Real wages will decrease by 3 percent per year. 
D) Real wages will decrease by 2 percent per year. 
E) Real wages will remain constant. 
A) Real wages will increase by 2 percent per year. 
B) Real wages will increase by 3 percent per year. 
C) Real wages will decrease by 3 percent per year. 
D) Real wages will decrease by 2 percent per year. 
E) Real wages will remain constant.

Question 6

The short-run aggregate supply curve:​

Accepted Answer

A) is positively sloped. 
B) is negatively sloped. 
C) is a vertical line parallel to the price level axis. 
D) is a horizontal line parallel to the output axis. 
E) is a ray from the origin with slope exactly equal to 1. 
A) is positively sloped. 
B) is negatively sloped. 
C) is a vertical line parallel to the price level axis. 
D) is a horizontal line parallel to the output axis. 
E) is a ray from the origin with slope exactly equal to 1.

Question 7

The figure below shows the short-run aggregate demand and supply curves of an economy.When real GDP is at Y2,_____.​ ​
Figure 10.2

Accepted Answer

A) potential output is greater than actual output. 
B) there is a recessionary gap. 
C) the price level is likely to fall. 
D) the actual unemployment rate is less than the natural rate of unemployment. 
E) aggregate demand is likely to increase to restore equilibrium. 
A) potential output is greater than actual output. 
B) there is a recessionary gap. 
C) the price level is likely to fall. 
D) the actual unemployment rate is less than the natural rate of unemployment. 
E) aggregate demand is likely to increase to restore equilibrium.

Question 8

Which of the following if true would suggest that an expansionary gap exists in an economy?​

Accepted Answer

A) Rapid inflation during a period when plant capacity utilization is below average 
B) A steady price level coupled with a 5 percent unemployment rate​ 
C) An unemployment rate below its natural rate and an unexpected increase in the consumer price index​ 
D) Sluggish growth in the rate of inflation and an exceptional increase in the Dow Jones average​ 
E) A modest increase in the number of new unemployment claims and a lower than expected price level​ 
A) Rapid inflation during a period when plant capacity utilization is below average 
B) A steady price level coupled with a 5 percent unemployment rate​ 
C) An unemployment rate below its natural rate and an unexpected increase in the consumer price index​ 
D) Sluggish growth in the rate of inflation and an exceptional increase in the Dow Jones average​ 
E) A modest increase in the number of new unemployment claims and a lower than expected price level​

Question 9

When the economy produces its potential output,_____ is zero.​

Accepted Answer

A) frictional unemployment 
B) cyclical unemployment​ 
C) seasonal unemployment​ 
D) structural unemployment​ 
E) disguised unemployment​ 
A) frictional unemployment 
B) cyclical unemployment​ 
C) seasonal unemployment​ 
D) structural unemployment​ 
E) disguised unemployment​

Question 10

The slope of the short-run aggregate supply curve depends on how sharply:​

Accepted Answer

A) the marginal cost of production rises as real GDP expands. 
B) the average cost of production rises as real GDP expands. 
C) real GDP increases as the price level rises. 
D) nominal GDP increases as the price level rises. 
E) product prices change as the price level rises. 
A) the marginal cost of production rises as real GDP expands. 
B) the average cost of production rises as real GDP expands. 
C) real GDP increases as the price level rises. 
D) nominal GDP increases as the price level rises. 
E) product prices change as the price level rises.

Question 11

The short run is a period of time during which:​

Accepted Answer

A) there is an expansionary gap that cannot be corrected using the passive approach. 
B) actual output equals potential output. 
C) there is a recessionary gap that cannot be corrected through discretionary policy. 
D) resource buyers and sellers cannot adjust fully to changes in the price level. 
E) resource buyers and sellers can adjust fully to changes in the price level. 
A) there is an expansionary gap that cannot be corrected using the passive approach. 
B) actual output equals potential output. 
C) there is a recessionary gap that cannot be corrected through discretionary policy. 
D) resource buyers and sellers cannot adjust fully to changes in the price level. 
E) resource buyers and sellers can adjust fully to changes in the price level.

Question 12

Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2.This implies that the price level has:​

Accepted Answer

A) increased by 20 percent. 
B) increased by 25 percent. 
C) remained unchanged. 
D) fallen by 10 percent. 
E) fallen by 20 percent. 
A) increased by 20 percent. 
B) increased by 25 percent. 
C) remained unchanged. 
D) fallen by 10 percent. 
E) fallen by 20 percent.

Question 13

A nominal wage is:​

Accepted Answer

A) always equal to the legal minimum wage. 
B) the same as the efficiency wage. 
C) measured in terms of the amount of goods and services it can purchase. 
D) measured in current dollars rather than in constant dollars. 
E) measured in constant dollars rather than in current dollars. 
A) always equal to the legal minimum wage. 
B) the same as the efficiency wage. 
C) measured in terms of the amount of goods and services it can purchase. 
D) measured in current dollars rather than in constant dollars. 
E) measured in constant dollars rather than in current dollars.

Question 14

The short-run equilibrium output in the economy described by the figure given below is Y1.​

Accepted Answer

A) True 
 B)False

Question 15

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model.Which of the following changes is depicted by the movement from Y1 to Y2?​ ​
Figure 10.9

Accepted Answer

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

Question 16

Which of these is not a beneficial supply shock?​

Accepted Answer

A) An abundant harvest that increases food supplies 
B) The discovery of natural resources​ 
C) Reductions in business taxes​ 
D) Technological advances​ 
E) Establishment of the Occupational Safety and Health Administration (OSH
A) ​ 
A) An abundant harvest that increases food supplies 
B) The discovery of natural resources​ 
C) Reductions in business taxes​ 
D) Technological advances​ 
E) Establishment of the Occupational Safety and Health Administration (OSH
A) ​

Question 17

In the figure given below,when aggregate supply is AS,the equilibrium output and price level will be Y2 and P2.​

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) It can lead to a temporary lower price level. 
B) It can create a recessionary gap. 
C) It can permanently decrease the economy's price level. 
D) It can shift the aggregate demand curve rightward. 
E) It can shift the aggregate demand curve leftward. 
A) It can lead to a temporary lower price level. 
B) It can create a recessionary gap. 
C) It can permanently decrease the economy's price level. 
D) It can shift the aggregate demand curve rightward. 
E) It can shift the aggregate demand curve leftward.

Question 19

The figure below shows the short-run aggregate demand and supply curves of an economy.If the economy is currently producing at Y2,long-run equilibrium will most likely be established by a(n):​ ​
Figure 10.2

Accepted Answer

A) increase in short-run aggregate supply. 
B) decrease in short-run aggregate supply. 
C) decrease in potential output. 
D) increase in potential output. 
E) rightward shift of the aggregate demand curve. 
A) increase in short-run aggregate supply. 
B) decrease in short-run aggregate supply. 
C) decrease in potential output. 
D) increase in potential output. 
E) rightward shift of the aggregate demand curve.

Question 20

Suppose the real wage remains unchanged between Year 1 and Year 2 but the nominal wage increases from $20 to $24.Based on this information,we can conclude that the price level has:​

Accepted Answer

A) increased by 20 percent. 
B) increased by 25 percent. 
C) remained unchanged. 
D) decreased by 10 percent. 
E) decreased by 20 percent. 
A) increased by 20 percent. 
B) increased by 25 percent. 
C) remained unchanged. 
D) decreased by 10 percent. 
E) decreased by 20 percent.

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

If resource prices are flexible,the long-run aggregate supply curve is vertical.

A recessionary gap is usually closed in the long run by a(n):

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

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

The short-run aggregate supply curve:

The figure below shows the short-run aggregate demand and supply curves of an economy.When real GDP is at Y₂,_____. Figure 10.2

Which of the following if true would suggest that an expansionary gap exists in an economy?

When the economy produces its potential output,_____ is zero.

The slope of the short-run aggregate supply curve depends on how sharply:

The short run is a period of time during which:

Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2.This implies that the price level has:

A nominal wage is:

The short-run equilibrium output in the economy described by the figure given below is Y₁.

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model.Which of the following changes is depicted by the movement from Y₁ to Y₂? Figure 10.9

Which of these is not a beneficial supply shock?

In the figure given below,when aggregate supply is AS,the equilibrium output and price level will be Y₂ and P₂.

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

The figure below shows the short-run aggregate demand and supply curves of an economy.If the economy is currently producing at Y₂,long-run equilibrium will most likely be established by a(n): Figure 10.2

Suppose the real wage remains unchanged between Year 1 and Year 2 but the nominal wage increases from $20 to $24.Based on this information,we can conclude that the price level has:

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

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Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

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Exam 10: Aggregate Supply

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

If resource prices are flexible,the long-run aggregate supply curve is vertical.​

A recessionary gap is usually closed in the long run by a(n):​

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

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?​

The short-run aggregate supply curve:​

The figure below shows the short-run aggregate demand and supply curves of an economy.When real GDP is at Y2,_____.​ ​ Figure 10.2

Which of the following if true would suggest that an expansionary gap exists in an economy?​

When the economy produces its potential output,_____ is zero.​

The slope of the short-run aggregate supply curve depends on how sharply:​

The short run is a period of time during which:​

Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2.This implies that the price level has:​

A nominal wage is:​

The short-run equilibrium output in the economy described by the figure given below is Y1.​

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model.Which of the following changes is depicted by the movement from Y1 to Y2?​ ​ Figure 10.9

Which of these is not a beneficial supply shock?​

In the figure given below,when aggregate supply is AS,the equilibrium output and price level will be Y2 and P2.​

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

The figure below shows the short-run aggregate demand and supply curves of an economy.If the economy is currently producing at Y2,long-run equilibrium will most likely be established by a(n):​ ​ Figure 10.2

Suppose the real wage remains unchanged between Year 1 and Year 2 but the nominal wage increases from $20 to $24.Based on this information,we can conclude that the price level has:​

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

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

If resource prices are flexible,the long-run aggregate supply curve is vertical.

A recessionary gap is usually closed in the long run by a(n):

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

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

The short-run aggregate supply curve:

The figure below shows the short-run aggregate demand and supply curves of an economy.When real GDP is at Y₂,_____. Figure 10.2

Which of the following if true would suggest that an expansionary gap exists in an economy?

When the economy produces its potential output,_____ is zero.

The slope of the short-run aggregate supply curve depends on how sharply:

The short run is a period of time during which:

Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2.This implies that the price level has:

A nominal wage is:

The short-run equilibrium output in the economy described by the figure given below is Y₁.

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model.Which of the following changes is depicted by the movement from Y₁ to Y₂? Figure 10.9

Which of these is not a beneficial supply shock?

In the figure given below,when aggregate supply is AS,the equilibrium output and price level will be Y₂ and P₂.

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

The figure below shows the short-run aggregate demand and supply curves of an economy.If the economy is currently producing at Y₂,long-run equilibrium will most likely be established by a(n): Figure 10.2

Suppose the real wage remains unchanged between Year 1 and Year 2 but the nominal wage increases from $20 to $24.Based on this information,we can conclude that the price level has: