Question 1

A coordination failure occurs when

Accepted Answer

A) production on a factory floor is disorganized 
B) customers regularly trip over loose welcome mats at stores 
C) employers and employees fail to reach an agreement to increase nominal wages, employment, and an expansionary gap 
D) an economy is at full employment 
E) employers and employees fail to reach an agreement to reduce nominal wages, unemployment, and a contractionary gap 
A) production on a factory floor is disorganized 
B) customers regularly trip over loose welcome mats at stores 
C) employers and employees fail to reach an agreement to increase nominal wages, employment, and an expansionary gap 
D) an economy is at full employment 
E) employers and employees fail to reach an agreement to reduce nominal wages, unemployment, and a contractionary gap

Question 2

In the long run, but not in the short run,

Accepted Answer

A) cyclical unemployment can exist 
B) structural unemployment can exist 
C) frictional unemployment can exist 
D) the actual rate of unemployment equals the natural rate of unemployment 
E) actual output can exceed potential output 
A) cyclical unemployment can exist 
B) structural unemployment can exist 
C) frictional unemployment can exist 
D) the actual rate of unemployment equals the natural rate of unemployment 
E) actual output can exceed potential output

Question 3

Which of the following is true regarding the closing of a contractionary gap?

Accepted Answer

A) The only way for the gap to close is for nominal wages to rise. 
B) Such a gap could be closed if the nominal wage grew more slowly over time than the price level. 
C) Once the economy falls into a contractionary gap, only a strong reduction in aggregate demand could close the gap. 
D) Inflation eventually ends contractionary gaps. 
E) Nominal wages and real wages should rise. 
A) The only way for the gap to close is for nominal wages to rise. 
B) Such a gap could be closed if the nominal wage grew more slowly over time than the price level. 
C) Once the economy falls into a contractionary gap, only a strong reduction in aggregate demand could close the gap. 
D) Inflation eventually ends contractionary gaps. 
E) Nominal wages and real wages should rise.

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) increases in the price level 
B) decreases in the price level 
C) outward shifts of the aggregate demand and supply curves 
D) a leftward shift of the aggregate demand curve along a vertical aggregate supply curve 
E) an increase in the potential level of real GDP 
A) increases in the price level 
B) decreases in the price level 
C) outward shifts of the aggregate demand and supply curves 
D) a leftward shift of the aggregate demand curve along a vertical aggregate supply curve 
E) an increase in the potential level of real GDP

Question 5

If the expected price level exceeds the actual price level, then

Accepted Answer

A) potential output falls 
B) real GDP may fall below potential output 
C) potential output increases 
D) nominal wages increase 
E) the inflation rate accelerates 
A) potential output falls 
B) real GDP may fall below potential output 
C) potential output increases 
D) nominal wages increase 
E) the inflation rate accelerates

Question 6

When the expected price level falls below the actual price level, firms

Accepted Answer

A) increase production in the short run 
B) decrease production in the short run 
C) maintain production in the short run but increase prices 
D) maintain production in the short run but decrease prices 
E) decrease production and lower prices in the short run 
A) increase production in the short run 
B) decrease production in the short run 
C) maintain production in the short run but increase prices 
D) maintain production in the short run but decrease prices 
E) decrease production and lower prices in the short run

Question 7

Aggregate supply describes the relationship between

Accepted Answer

A) price level and real GDP 
B) nominal and real GDP 
C) real GDP and the level of production 
D) nominal GDP and the level of output 
E) the level of output and income 
A) price level and real GDP 
B) nominal and real GDP 
C) real GDP and the level of production 
D) nominal GDP and the level of output 
E) the level of output and income

Question 8

If the expected price level exceeds the actual price level, then firms will

Accepted Answer

A) expand output hoping that prices will rise 
B) expand output if workers suffer from money illusion 
C) expand output if some resource prices are fixed by contracts 
D) reduce output if some resource prices are fixed by contracts 
E) reduce output if workers suffer from money illusion 
A) expand output hoping that prices will rise 
B) expand output if workers suffer from money illusion 
C) expand output if some resource prices are fixed by contracts 
D) reduce output if some resource prices are fixed by contracts 
E) reduce output if workers suffer from money illusion

Question 9

Exhibit 11-2
  
-If the actual price level in Exhibit 11-2 exceeds 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 greater than actual output 
E) unemployment is above 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 greater than actual output 
E) unemployment is above the natural rate

Question 10

When the economy is at its potential output level, which of the following is not true?

Accepted Answer

A) Firms' and workers' expectations about the price level are realized. 
B) The nominal wage is a very poor measure of the expected real wage. 
C) The unemployment rate is about 4 to 6 percent. 
D) The economy is producing its maximum sustainable output. 
E) The actual price level equals the expected price level. 
A) Firms' and workers' expectations about the price level are realized. 
B) The nominal wage is a very poor measure of the expected real wage. 
C) The unemployment rate is about 4 to 6 percent. 
D) The economy is producing its maximum sustainable output. 
E) The actual price level equals the expected price level.

Question 11

Which of the following supply shocks would shift the aggregate supply curve inward?

Accepted Answer

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

Question 12

During recessions, workers resist efforts to reduce nominal wages because

Accepted Answer

A) they believe wage reductions are inefficient 
B) they care more about nominal wages than about real wages 
C) they worry that they will not qualify for unemployment benefits 
D) they would rather be unemployed than accept a lower nominal wage 
E) of the difficulty of coordinating wage cuts on a large scale 
A) they believe wage reductions are inefficient 
B) they care more about nominal wages than about real wages 
C) they worry that they will not qualify for unemployment benefits 
D) they would rather be unemployed than accept a lower nominal wage 
E) of the difficulty of coordinating wage cuts on a large scale

Question 13

The nominal wage represents

Accepted Answer

A) the quantity of goods and services a worker can purchase in exchange for work time 
B) the dollar value of the goods and services a worker can purchase in exchange for work time 
C) real wages minus taxes paid on wages 
D) the most accurate measure for comparing employee standard of living across time 
E) real wages divided by the price level 
A) the quantity of goods and services a worker can purchase in exchange for work time 
B) the dollar value of the goods and services a worker can purchase in exchange for work time 
C) real wages minus taxes paid on wages 
D) the most accurate measure for comparing employee standard of living across time 
E) real wages divided by the price level

Question 14

As actual output rises above the potential level, which of the following must be true?

Accepted Answer

A) more resources become unemployed 
B) prices remain constant 
C) real GDP rises 
D) nominal GDP remains constant 
E) production falls 
A) more resources become unemployed 
B) prices remain constant 
C) real GDP rises 
D) nominal GDP remains constant 
E) production falls

Question 15

If the economy were at its potential output level, which of the following is not true?

Accepted Answer

A) The actual unemployment rate would equal the natural rate. 
B) There would be some cyclical unemployment. 
C) There would be some seasonal unemployment. 
D) There would be some frictional unemployment. 
E) There would be some structural unemployment. 
A) The actual unemployment rate would equal the natural rate. 
B) There would be some cyclical unemployment. 
C) There would be some seasonal unemployment. 
D) There would be some frictional unemployment. 
E) There would be some structural unemployment.

Question 16

If the price level turns out to be lower than expected,

Accepted Answer

A) businesses cut back production 
B) the potential output level decreases 
C) initially, the short-run aggregate supply curve shifts leftward; later, there is a downward movement along that curve 
D) initially, the short-run aggregate supply curve shifts leftward; later, there is an upward movement along that curve 
E) an expansionary gap develops 
A) businesses cut back production 
B) the potential output level decreases 
C) initially, the short-run aggregate supply curve shifts leftward; later, there is a downward movement along that curve 
D) initially, the short-run aggregate supply curve shifts leftward; later, there is an upward movement along that curve 
E) an expansionary gap develops

Question 17

If resource suppliers and demanders find out that their price expectations were wrong, they will take corrective actions that will

Accepted Answer

A) cause the economy to move away from the potential output level 
B) raise the unemployment level above the natural rate of unemployment 
C) shift the aggregate demand curve 
D) shift the short-run aggregate supply curve 
E) raise the actual price level 
A) cause the economy to move away from the potential output level 
B) raise the unemployment level above the natural rate of unemployment 
C) shift the aggregate demand curve 
D) shift the short-run aggregate supply curve 
E) raise the actual price level

Question 18

Exhibit 11-2
  
-In Exhibit 11-2, an expansionary gap would be represented by the distance

Accepted Answer

A) Y2 - Y1 
B) Y3 - Y1 
C) Y2 - Y3 
D) P3 - P1 
E) P2 - P3 
A) Y2 - Y1 
B) Y3 - Y1 
C) Y2 - Y3 
D) P3 - P1 
E) P2 - P3

Question 19

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 20

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

Exam 12: Aggregate Supply

A coordination failure occurs when

In the long run, but not in the short run,

Which of the following is true regarding the closing of a contractionary gap?

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

If the expected price level exceeds the actual price level, then

When the expected price level falls below the actual price level, firms

Aggregate supply describes the relationship between

If the expected price level exceeds the actual price level, then firms will

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

When the economy is at its potential output level, which of the following is not true?

Which of the following supply shocks would shift the aggregate supply curve inward?

During recessions, workers resist efforts to reduce nominal wages because

The nominal wage represents

As actual output rises above the potential level, which of the following must be true?

If the economy were at its potential output level, which of the following is not true?

If the price level turns out to be lower than expected,

If resource suppliers and demanders find out that their price expectations were wrong, they will take corrective actions that will

Exhibit 11-2 -In Exhibit 11-2, an expansionary gap would be represented by the distance

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

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

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

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