Question 1

Exhibit 11-3
  
-Consider Exhibit 11-3. The short-run equilibrium output is Y1.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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

Accepted Answer

A) an increase in the size of the labor force 
B) a reduction in the quality of the labor force 
C) a reduction in the cost of using computers 
D) a decrease in the price level 
E) an increase in the price level 
A) an increase in the size of the labor force 
B) a reduction in the quality of the labor force 
C) a reduction in the cost of using computers 
D) a decrease in the price level 
E) an increase in the price level

Question 4

Actual output falls below potential output

Accepted Answer

A) during a recession 
B) when aggregate demand exceeds aggregate supply 
C) when the natural rate of unemployment exceeds the actual rate of unemployment 
D) when the natural rate of unemployment is zero 
E) when short run aggregate supply exceeds long run aggregate supply 
A) during a recession 
B) when aggregate demand exceeds aggregate supply 
C) when the natural rate of unemployment exceeds the actual rate of unemployment 
D) when the natural rate of unemployment is zero 
E) when short run aggregate supply exceeds long run aggregate supply

Question 5

Which of the following would be evidence that a contractionary gap exists?

Accepted Answer

A) Rapid deflation during a period in which plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising lower than usual, and the consumer price index lower than expected. 
D) Inflation has risen markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is rising. 
A) Rapid deflation during a period in which plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising lower than usual, and the consumer price index lower than expected. 
D) Inflation has risen markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is rising.

Question 6

Exhibit 11-8
  
-If the economy is at point H in Exhibit 11-8, there is a(n)

Accepted Answer

A) expansionary gap of $300 billion (i.e., $0.3 trillion) 
B) contractionary gap of $300 billion 
C) contractionary gap of 10 
D) expansionary gap of 20 
E) expansionary gap of 10 
A) expansionary gap of $300 billion (i.e., $0.3 trillion) 
B) contractionary gap of $300 billion 
C) contractionary gap of 10 
D) expansionary gap of 20 
E) expansionary gap of 10

Question 7

During a recession, output is

Accepted Answer

A) above potential and unemployment is below the natural rate 
B) above potential and unemployment is above the natural rate 
C) below potential and unemployment is below the natural rate 
D) below potential and unemployment is above the natural rate 
E) below potential and the price level is below the natural level 
A) above potential and unemployment is below the natural rate 
B) above potential and unemployment is above the natural rate 
C) below potential and unemployment is below the natural rate 
D) below potential and unemployment is above the natural rate 
E) below potential and the price level is below the natural level

Question 8

Exhibit 11-2
  
-If the actual price level in Exhibit 11-2 exceeds the expected price level, then

Accepted Answer

A) equilibrium output is Y2 in the short run 
B) equilibrium output is Y1 in the short run 
C) the actual unemployment rate is below the natural rate 
D) potential output is greater than actual output 
E) the actual price level is less than the equilibrium price level 
A) equilibrium output is Y2 in the short run 
B) equilibrium output is Y1 in the short run 
C) the actual unemployment rate is below the natural rate 
D) potential output is greater than actual output 
E) the actual price level is less than the equilibrium price level

Question 9

As a contractionary gap is closed in the long run,

Accepted Answer

A) the inflation rate increases and unemployment decreases 
B) output increases and the price level decreases 
C) both output and the price level increase 
D) both output and the price level decrease 
E) the inflation rate decreases and unemployment increases 
A) the inflation rate increases and unemployment decreases 
B) output increases and the price level decreases 
C) both output and the price level increase 
D) both output and the price level decrease 
E) the inflation rate decreases and unemployment increases

Question 10

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 11

Compensation is usually negotiated in terms of the nominal wage because wage agreements are based on expected price levels.

Accepted Answer

A) True 
 B)False

Question 12

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is not true?

Accepted Answer

A) The actual price level equals the expected price level. 
B) Aggregate quantity supplied equals potential output. 
C) Aggregate quantity demanded equals potential output. 
D) Aggregate quantity supplied equals aggregate quantity demanded. 
E) The aggregate demand curve is horizontal at the potential output level. 
A) The actual price level equals the expected price level. 
B) Aggregate quantity supplied equals potential output. 
C) Aggregate quantity demanded equals potential output. 
D) Aggregate quantity supplied equals aggregate quantity demanded. 
E) The aggregate demand curve is horizontal at the potential output level.

Question 13

Throughout the 1990s,

Accepted Answer

A) unemployment rates were higher in Europe than in the United States 
B) unemployment rates fell in Europe and rose in the United States 
C) unemployment rates in Europe rose because of the decade-long recession there 
D) unemployment rates fell in Europe 
E) the unemployment rate rose in the United States 
A) unemployment rates were higher in Europe than in the United States 
B) unemployment rates fell in Europe and rose in the United States 
C) unemployment rates in Europe rose because of the decade-long recession there 
D) unemployment rates fell in Europe 
E) the unemployment rate rose in the United States

Question 14

Exhibit 11-2
  
-If the actual price level in Exhibit 11-2 is lower than the expected price level, then

Accepted Answer

A) equilibrium output might be Y2 in the short run 
B) equilibrium output might be Y1 in the short run 
C) equilibrium output might be Y3 in the short run 
D) potential output is less than actual output 
E) unemployment is below the natural rate 
A) equilibrium output might be Y2 in the short run 
B) equilibrium output might be Y1 in the short run 
C) equilibrium output might be Y3 in the short run 
D) potential output is less than actual output 
E) unemployment is below the natural rate

Question 15

Exhibit 11-3
  
-In Exhibit 11-3, at income level Y2

Accepted Answer

A) potential output is greater than actual output 
B) there is a contractionary gap 
C) the price level will fall 
D) the actual unemployment rate equals the natural rate of unemployment 
E) aggregate supply will increase to restore equilibrium 
A) potential output is greater than actual output 
B) there is a contractionary gap 
C) the price level will fall 
D) the actual unemployment rate equals the natural rate of unemployment 
E) aggregate supply will increase to restore equilibrium

Question 16

If the actual price level is lower than the expected price level, the economy will contract in the short run.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Which of the following supply shocks would shift the long-run aggregate supply curve outward?

Accepted Answer

A) an increase in business taxes 
B) an increase in gasoline taxes 
C) an increase in the cost of raw materials 
D) an increase in the amount and cost of government regulation 
E) an increase in agricultural output 
A) an increase in business taxes 
B) an increase in gasoline taxes 
C) an increase in the cost of raw materials 
D) an increase in the amount and cost of government regulation 
E) an increase in agricultural output

Question 19

A nominal wage is

Accepted Answer

A) not above the legal minimum 
B) always above the legal minimum 
C) measured in terms of goods and services it can buy 
D) measured in current dollars rather than in constant dollars 
E) measured in constant dollars rather than in current dollars 
A) not above the legal minimum 
B) always above the legal minimum 
C) measured in terms of goods and services it can buy 
D) measured in current dollars rather than in constant dollars 
E) measured in constant dollars rather than in current dollars

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 12: Aggregate Supply

Exhibit 11-3 -Consider Exhibit 11-3. The short-run equilibrium output is Y1.

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

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

Actual output falls below potential output

Which of the following would be evidence that a contractionary gap exists?

Exhibit 11-8 -If the economy is at point H in Exhibit 11-8, there is a(n)

During a recession, output is

Exhibit 11-2 -If the actual price level in Exhibit 11-2 exceeds the expected price level, then

As a contractionary gap is closed in the long run,

Which of the following is true in the long run?

Compensation is usually negotiated in terms of the nominal wage because wage agreements are based on expected price levels.

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is not true?

Throughout the 1990s,

Exhibit 11-2 -If the actual price level in Exhibit 11-2 is lower than the expected price level, then

Exhibit 11-3 -In Exhibit 11-3, at income level Y2

If the actual price level is lower than the expected price level, the economy will contract in the short run.

The capital stock increases

Which of the following supply shocks would shift the long-run aggregate supply curve outward?

A nominal wage is

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

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

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

Aaggregate Expenditure and Agregate Demand

Aggregate Expenditure and 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

Exhibit 11-3 -Consider Exhibit 11-3. The short-run equilibrium output is Y₁.

Exhibit 11-3 -In Exhibit 11-3, at income level Y₂