Question 1

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

Question 2

Exhibit 11-7
  
-The graph in Exhibit 11-7 shows a(n)

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) increase in 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) increase in aggregate quantity demanded

Question 3

As an expansionary gap is closed in the long run by firms' actions,

Accepted Answer

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

Question 4

Exhibit 11-1
  
-Given aggregate demand and aggregate supply schedule #2 in Exhibit 11-1, the equilibrium output level and price level are

Accepted Answer

A) output $7.0, price level 110 
B) output $6.5, price level 120 
C) output $6.0, price level 130 
D) output $5.5, price level 140 
E) output $5.0, price level 150 
A) output $7.0, price level 110 
B) output $6.5, price level 120 
C) output $6.0, price level 130 
D) output $5.5, price level 140 
E) output $5.0, price level 150

Question 5

Exhibit 11-4
  
-The graph in Exhibit 11-4, when aggregate supply is AS, the equilibrium output and price level will be Y2 and P2.

Accepted Answer

A) True 
 B)False

Question 6

The main effect of an increase in the capital stock is a(n)

Accepted Answer

A) rightward shift of the long-run aggregate supply curve 
B) rightward shift of the aggregate demand curve 
C) leftward shift of the long-run aggregate supply curve 
D) leftward shift of the aggregate demand curve 
E) increase in price and output levels 
A) rightward shift of the long-run aggregate supply curve 
B) rightward shift of the aggregate demand curve 
C) leftward shift of the long-run aggregate supply curve 
D) leftward shift of the aggregate demand curve 
E) increase in price and output levels

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would be strong evidence that an expansionary gap exists?

Accepted Answer

A) Rapid inflation during a period when plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising is higher than usual, and the consumer price index is up more than expected. 
D) Inflation has slowed markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is falling. 
A) Rapid inflation during a period when plant capacity utilization is below average. 
B) A steady price level and a 5 percent unemployment rate. 
C) Help wanted advertising is higher than usual, and the consumer price index is up more than expected. 
D) Inflation has slowed markedly and the Dow Jones average is at record levels. 
E) The number of new unemployment claims has skyrocketed and the price level is falling.

Question 9

Floods in the midwest that diminish farm output would shift the aggregate supply curve outward (to the right).

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would cause the long-run aggregate supply curve to shift rightward?

Accepted Answer

A) a rise in energy prices 
B) a drop in the actual price level 
C) workers opting for more leisure time and less time on the job 
D) a level of investment spending that is less than depreciation of the capital stock 
E) a technological breakthrough with widespread practical applications that occurs in the microcomputer industry 
A) a rise in energy prices 
B) a drop in the actual price level 
C) workers opting for more leisure time and less time on the job 
D) a level of investment spending that is less than depreciation of the capital stock 
E) a technological breakthrough with widespread practical applications that occurs in the microcomputer industry

Question 11

Exhibit 11-2
  
-In Exhibit 11-2, if P1 is the prevailing price level, then

Accepted Answer

A) there is an expansionary gap 
B) the price level will decrease 
C) the expected price level is the same as the actual price level 
D) the unemployment rate is below the natural unemployment rate 
E) potential output is less than the actual level of output 
A) there is an expansionary gap 
B) the price level will decrease 
C) the expected price level is the same as the actual price level 
D) the unemployment rate is below the natural unemployment rate 
E) potential output is less than the actual level of output

Question 12

Exhibit 11-1
  
-Given aggregate demand and aggregate supply schedule #3 in Exhibit 11-1, the equilibrium level of output and price level are $5.5 and 140.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 11-6
  
-In Exhibit 11-6, at income level Y1

Accepted Answer

A) potential output is less than actual output 
B) there is an expansionary gap 
C) the price level will rise 
D) aggregate supply will fall to restore equilibrium 
E) the actual unemployment rate is greater than the natural rate of unemployment 
A) potential output is less than actual output 
B) there is an expansionary gap 
C) the price level will rise 
D) aggregate supply will fall to restore equilibrium 
E) the actual unemployment rate is greater than the natural rate of unemployment

Question 14

A contractionary gap may be 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) increase in aggregate demand 
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) increase in aggregate demand

Question 15

Exhibit 11-3
  
-Consider Exhibit 11-3. In this situation, long-run equilibrium would be established by a(n)

Accepted Answer

A) increase of short-run aggregate supply to close the expansionary gap 
B) decrease of short-run aggregate supply to close the expansionary gap 
C) decrease of short-run aggregate supply to close the contractionary gap 
D) increase of short-run aggregate supply to close the contractionary gap 
E) rightward shift of the aggregate demand curve 
A) increase of short-run aggregate supply to close the expansionary gap 
B) decrease of short-run aggregate supply to close the expansionary gap 
C) decrease of short-run aggregate supply to close the contractionary gap 
D) increase of short-run aggregate supply to close the contractionary gap 
E) rightward shift of the aggregate demand curve

Question 16

The main effect of a decrease in the stock of capital is a(n)

Accepted Answer

A) rightward shift of the short-run aggregate supply curve 
B) rightward shift of the aggregate demand curve 
C) leftward shift of the long-run aggregate supply curve 
D) leftward shift of the aggregate demand curve 
E) increase in price and output levels 
A) rightward shift of the short-run aggregate supply curve 
B) rightward shift of the aggregate demand curve 
C) leftward shift of the long-run aggregate supply curve 
D) leftward shift of the aggregate demand curve 
E) increase in price and output levels

Question 17

Exhibit 11-10
  
-The graph in Exhibit 11-10 shows a(n)

Accepted Answer

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

Question 18

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

Accepted Answer

A) The actual unemployment rate would be greater than the natural rate. 
B) The labor market would be in equilibrium. 
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 be greater than the natural rate. 
B) The labor market would be in equilibrium. 
C) There would be some seasonal unemployment. 
D) There would be some frictional unemployment. 
E) There would be some structural unemployment.

Question 19

Because some resource prices are assumed to be constant in the short run,

Accepted Answer

A) the aggregate supply curve is horizontal in the short run 
B) the aggregate supply curve is vertical in the short run 
C) costs do not increase as much as output prices do when the price level rises 
D) an increase in price per unit is the same thing as a decrease in profit per unit 
E) firms' total costs of production decrease as output increases 
A) the aggregate supply curve is horizontal in the short run 
B) the aggregate supply curve is vertical in the short run 
C) costs do not increase as much as output prices do when the price level rises 
D) an increase in price per unit is the same thing as a decrease in profit per unit 
E) firms' total costs of production decrease as output increases

Question 20

Exhibit 11-1
  
-Given aggregate demand and aggregate supply schedule #1 in Exhibit 11-1, the equilibrium level of output is

Accepted Answer

A) $5.0 
B) $5.5 
C) $6.0 
D) $6.5 
E) $7.0 
A) $5.0 
B) $5.5 
C) $6.0 
D) $6.5 
E) $7.0

Exam 12: Aggregate Supply

As actual output falls below the potential level, which of the following must be true?

Exhibit 11-7 -The graph in Exhibit 11-7 shows a(n)

As an expansionary gap is closed in the long run by firms' actions,

Exhibit 11-1 -Given aggregate demand and aggregate supply schedule #2 in Exhibit 11-1, the equilibrium output level and price level are

Exhibit 11-4 -The graph in Exhibit 11-4, when aggregate supply is AS, the equilibrium output and price level will be Y2 and P2.

The main effect of an increase in the capital stock is a(n)

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

Which of the following would be strong evidence that an expansionary gap exists?

Floods in the midwest that diminish farm output would shift the aggregate supply curve outward (to the right).

Which of the following would cause the long-run aggregate supply curve to shift rightward?

Exhibit 11-2 -In Exhibit 11-2, if P1 is the prevailing price level, then

Exhibit 11-1 -Given aggregate demand and aggregate supply schedule #3 in Exhibit 11-1, the equilibrium level of output and price level are $5.5 and 140.

Exhibit 11-6 -In Exhibit 11-6, at income level Y1

A contractionary gap may be closed in the long run by a(n)

Exhibit 11-3 -Consider Exhibit 11-3. In this situation, long-run equilibrium would be established by a(n)

The main effect of a decrease in the stock of capital is a(n)

Exhibit 11-10 -The graph in Exhibit 11-10 shows a(n)

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

Because some resource prices are assumed to be constant in the short run,

Exhibit 11-1 -Given aggregate demand and aggregate supply schedule #1 in Exhibit 11-1, the equilibrium level of output is

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 11-4 -The graph in Exhibit 11-4, when aggregate supply is AS, the equilibrium output and price level will be Y₂ and P₂.

Exhibit 11-2 -In Exhibit 11-2, if P₁ is the prevailing price level, then

Exhibit 11-6 -In Exhibit 11-6, at income level Y₁