Question 1

If the price level is higher than expected,firms might raise their production in the short run if

Accepted Answer

A) the nominal wage they pay their employees was set based on the expected price level. 
B) prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C) they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level. 
D) All of the above are correct. 
A) the nominal wage they pay their employees was set based on the expected price level. 
B) prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C) they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level. 
D) All of the above are correct.

Question 2

Other things the same,if the long-run aggregate supply curve shifts right,prices

Accepted Answer

A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases. 
A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases.

Question 3

A change in the expected price level is likely to cause which of the following?

Accepted Answer

A) a shift in the short-run aggregate supply curve and long-run aggregate supply curve 
B) a shift in the short run aggregate supply curve 
C) a shift in the aggregate demand curve 
D) a shift in the long-run aggregate supply curve 
A) a shift in the short-run aggregate supply curve and long-run aggregate supply curve 
B) a shift in the short run aggregate supply curve 
C) a shift in the aggregate demand curve 
D) a shift in the long-run aggregate supply curve

Question 4

A candidate for political office announces the following policies which,she says,economics clearly demonstrates will lead to higher output in the long run: 1.increase immigration from abroad 2.make trade more open between the US and other countries.

Accepted Answer

A) 1 and 2 both shift long-run aggregate supply right. 
B) 1 and 2 both shift long-run aggregate supply left. 
C) 1 shifts long-run aggregate supply right,2 shifts long-run aggregate supply left. 
D) 1 shifts long-run aggregate supply left,2 shifts long-run aggregate supply right. 
A) 1 and 2 both shift long-run aggregate supply right. 
B) 1 and 2 both shift long-run aggregate supply left. 
C) 1 shifts long-run aggregate supply right,2 shifts long-run aggregate supply left. 
D) 1 shifts long-run aggregate supply left,2 shifts long-run aggregate supply right.

Question 5

Other things the same,continued increases in technology lead to

Accepted Answer

A) continued increases in the price level and real GDP. 
B) continued decreases in the price level and real GDP. 
C) continued increases in real GDP and continued increases in the price level. 
D) continued increases in real GDP and continued decreases in the price level. 
A) continued increases in the price level and real GDP. 
B) continued decreases in the price level and real GDP. 
C) continued increases in real GDP and continued increases in the price level. 
D) continued increases in real GDP and continued decreases in the price level.

Question 6

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms have

Accepted Answer

A) higher than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied. 
B) higher than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied. 
C) lower than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied. 
D) lower than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied. 
A) higher than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied. 
B) higher than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied. 
C) lower than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied. 
D) lower than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied.

Question 7

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A) nominal wages are slow to adjust to changing economic conditions 
B) as the price level falls,the exchange rate falls 
C) an increase in the money supply lowers the interest rate 
D) an increase in the interest rate increases investment spending 
A) nominal wages are slow to adjust to changing economic conditions 
B) as the price level falls,the exchange rate falls 
C) an increase in the money supply lowers the interest rate 
D) an increase in the interest rate increases investment spending

Question 8

Which of the following shifts short-run,but not long-run aggregate supply right?

Accepted Answer

A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply 
A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply

Question 9

The position of the long-run aggregate supply curve

Accepted Answer

A) is determined by resource usage and technology. 
B) is at the point where the unemployment rate is zero. 
C) shifts to the right when the money supply increases. 
D) is at the point where the economy would cease to grow. 
A) is determined by resource usage and technology. 
B) is at the point where the unemployment rate is zero. 
C) shifts to the right when the money supply increases. 
D) is at the point where the economy would cease to grow.

Question 10

If the actual price level is 165,but people had been expecting it to be 160,then

Accepted Answer

A) the quantity of output supplied rises,but only in the short run. 
B) the quantity of output supplied rises in the short run and the long run. 
C) the quantity of output supplied falls,but only in the short run. 
D) the quantity of output supplied falls in the short run and the long run. 
A) the quantity of output supplied rises,but only in the short run. 
B) the quantity of output supplied rises in the short run and the long run. 
C) the quantity of output supplied falls,but only in the short run. 
D) the quantity of output supplied falls in the short run and the long run.

Question 11

The aggregate supply curve is

Accepted Answer

A) vertical in the long run and slopes upward in the short run. 
B) upward sloping in the long run and vertical in the short run. 
C) vertical in the short run and in the long run. 
D) upward sloping in the short run and in the long run. 
A) vertical in the long run and slopes upward in the short run. 
B) upward sloping in the long run and vertical in the short run. 
C) vertical in the short run and in the long run. 
D) upward sloping in the short run and in the long run.

Question 12

Which of the following shifts both short-run and long-run aggregate supply left?

Accepted Answer

A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) a decrease in the money supply 
A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) a decrease in the money supply

Question 13

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

Accepted Answer

A) increased,so it would increase production. 
B) increased,so it would decrease production. 
C) decreased,so it would increase production. 
D) decreased,so it would decrease production. 
A) increased,so it would increase production. 
B) increased,so it would decrease production. 
C) decreased,so it would increase production. 
D) decreased,so it would decrease production.

Question 14

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

Accepted Answer

A) less than it desires and increase its production. 
B) less than it desires and decrease its production. 
C) more than it desires and increase its production. 
D) less than it desires and decrease its production 
A) less than it desires and increase its production. 
B) less than it desires and decrease its production. 
C) more than it desires and increase its production. 
D) less than it desires and decrease its production

Question 15

When the actual change in the price level differs from its expected change,which of the following can explain why firms might change their production?

Accepted Answer

A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices 
A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices

Exam 20: Aggregate Demand and Aggregate Supply: The Aggregate-Supply Curve

If the price level is higher than expected,firms might raise their production in the short run if

Other things the same,if the long-run aggregate supply curve shifts right,prices

A change in the expected price level is likely to cause which of the following?

A candidate for political office announces the following policies which,she says,economics clearly demonstrates will lead to higher output in the long run: 1.increase immigration from abroad 2.make trade more open between the US and other countries.

Other things the same,continued increases in technology lead to

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms have

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Which of the following shifts short-run,but not long-run aggregate supply right?

The position of the long-run aggregate supply curve

If the actual price level is 165,but people had been expecting it to be 160,then

The aggregate supply curve is

Which of the following shifts both short-run and long-run aggregate supply left?

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

When the actual change in the price level differs from its expected change,which of the following can explain why firms might change their production?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income

Measuring a Nations Income: The Economy's Income and Expenditure

Measuring a Nations Income: The Measurement of GDP