Question 1

Exhibit 10-3  
-In Exhibit 10-3,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 D

Question 2

The short-run aggregate supply curve slopes upward because quantity supplied

Accepted Answer

A) increases when cost per unit falls 
B) decreases when cost per unit falls 
C) increases when the price level increases 
D) increases when GDP decreases 
E) decreases as profit per unit increases 
A) increases when cost per unit falls 
B) decreases when cost per unit falls 
C) increases when the price level increases 
D) increases when GDP decreases 
E) decreases as profit per unit increases C

Question 3

Which of the following is true of the short-run aggregate supply curve?

Accepted Answer

A) It shows the relation between the inflation rate and the quantity of aggregate output firms supply,other things constant. 
B) It shows the relation between the price of labor and the aggregate quantity of labor workers supply,other things constant. 
C) It shows the relation between the interest rate and the quantity of capital goods firms supply,other things constant. 
D) It shows the relation between the price level and the quantity of aggregate output firms supply,other things constant. 
E) It displays an inverse relationship between the price level and real GDP. 
A) It shows the relation between the inflation rate and the quantity of aggregate output firms supply,other things constant. 
B) It shows the relation between the price of labor and the aggregate quantity of labor workers supply,other things constant. 
C) It shows the relation between the interest rate and the quantity of capital goods firms supply,other things constant. 
D) It shows the relation between the price level and the quantity of aggregate output firms supply,other things constant. 
E) It displays an inverse relationship between the price level and real GDP. D

Question 4

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 5

In the long run,the price level is determined by aggregate supply.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Wage agreements may cause costs to be __________ flexible than prices so that __________ in the price level cause __________ in aggregate quantity supplied.

Accepted Answer

A) less; decreases; decreases 
B) less; increases; increases 
C) less; decreases; increases 
D) more; decreases; increases 
E) more; increases; increases 
A) less; decreases; decreases 
B) less; increases; increases 
C) less; decreases; increases 
D) more; decreases; increases 
E) more; increases; increases

Question 8

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 9

Wage agreements may cause costs to be __________ flexible than prices so that __________ in the price level cause __________ in aggregate quantity supplied.

Accepted Answer

A) more; decreases; decreases 
B) more; increases; decreases 
C) less; increases; decreases 
D) less; decreases; increases 
E) less; decreases; decreases 
A) more; decreases; decreases 
B) more; increases; decreases 
C) less; increases; decreases 
D) less; decreases; increases 
E) less; decreases; decreases

Question 10

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 11

If the actual price level exceeds the expected price level reflected in long-term contracts,

Accepted Answer

A) firms will find production more profitable than they had expected and will increase the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
D) resource owners,because they are making a lower profit than they had expected,will decrease the quantity of output supplied 
E) unemployment will increase 
A) firms will find production more profitable than they had expected and will increase the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
D) resource owners,because they are making a lower profit than they had expected,will decrease the quantity of output supplied 
E) unemployment will increase

Question 12

Exhibit 10-4  
-The various output levels produced at different price levels is reflected in the

Accepted Answer

A) short-run aggregate supply curve 
B) aggregate demand curve 
C) labor demand curve 
D) labor supply curve 
E) production possibilities frontier 
A) short-run aggregate supply curve 
B) aggregate demand curve 
C) labor demand curve 
D) labor supply curve 
E) production possibilities frontier

Question 13

Exhibit 10-2  
-In Exhibit 10-2,a contractionary gap would be represented by the distance

Accepted Answer

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

Question 14

Exhibit 10-4  
-Exhibit 10-4 shows that the

Accepted Answer

A) expansionary gap has been closed 
B) contractionary gap has been closed 
C) potential level of real GDP has risen 
D) potential level of real GDP has fallen 
E) economy will experience deflation 
A) expansionary gap has been closed 
B) contractionary gap has been closed 
C) potential level of real GDP has risen 
D) potential level of real GDP has fallen 
E) economy will experience deflation

Question 15

Fixed resource prices help explain why firms

Accepted Answer

A) increase output in the short run when the price level increases 
B) keep production levels constant in the short run when the price level decreases 
C) sell output in the short run at fixed prices 
D) increase output in the long run when the price level increases 
E) decrease production when nominal wages fall in the long run 
A) increase output in the short run when the price level increases 
B) keep production levels constant in the short run when the price level decreases 
C) sell output in the short run at fixed prices 
D) increase output in the long run when the price level increases 
E) decrease production when nominal wages fall in the long run

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.Which of the following is true?

Accepted Answer

A) The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward. 
B) The short-run aggregate supply curve shifts rightward and the long-run supply curve shifts rightward. 
C) The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward. 
D) The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift. 
E) There will be a movement to the left along the aggregate demand curve. 
A) The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward. 
B) The short-run aggregate supply curve shifts rightward and the long-run supply curve shifts rightward. 
C) The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward. 
D) The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift. 
E) There will be a movement to the left along the aggregate demand curve.

Question 18

The short run is a period of time

Accepted Answer

A) when there is an expansionary gap and firms run their plants only for short periods 
B) of one year or less 
C) when there is a contractionary gap 
D) during which resource buyers and sellers cannot adjust fully to changes in the price level 
E) when resource buyers and sellers can adjust fully to changes in the price level 
A) when there is an expansionary gap and firms run their plants only for short periods 
B) of one year or less 
C) when there is a contractionary gap 
D) during which resource buyers and sellers cannot adjust fully to changes in the price level 
E) when resource buyers and sellers can adjust fully to changes in the price level

Question 19

Exhibit 10-9  
-The movement shown in Exhibit 10-9 could be caused by

Accepted Answer

A) government policies to increase demand 
B) weather conditions causing worldwide crop failures 
C) an attempt by key resource producers to monopolize supply 
D) an increase in taxation or a decrease in government spending 
E) an increase in labor productivity 
A) government policies to increase demand 
B) weather conditions causing worldwide crop failures 
C) an attempt by key resource producers to monopolize supply 
D) an increase in taxation or a decrease in government spending 
E) an increase in labor productivity

Question 20

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

Accepted Answer

A) a decline 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) an increase in the price level 
E) an increase in aggregate demand 
A) a decline 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) an increase in the price level 
E) an increase in aggregate demand

Exam 11: Aggregate Supply

Exhibit 10-3 -In Exhibit 10-3,at income level Y2

The short-run aggregate supply curve slopes upward because quantity supplied

Which of the following is true of the short-run aggregate supply curve?

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

In the long run,the price level is determined by aggregate supply.

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

Wage agreements may cause costs to be __________ flexible than prices so that __________ in the price level cause __________ in aggregate quantity supplied.

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

Wage agreements may cause costs to be __________ flexible than prices so that __________ in the price level cause __________ in aggregate quantity supplied.

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

If the actual price level exceeds the expected price level reflected in long-term contracts,

Exhibit 10-4 -The various output levels produced at different price levels is reflected in the

Exhibit 10-2 -In Exhibit 10-2,a contractionary gap would be represented by the distance

Exhibit 10-4 -Exhibit 10-4 shows that the

Fixed resource prices help explain why firms

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

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.Which of the following is true?

The short run is a period of time

Exhibit 10-9 -The movement shown in Exhibit 10-9 could be caused by

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

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate 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

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

Exhibit 10-3 -In Exhibit 10-3,at income level Y₂

Wage agreements may cause costs to be flexible than prices so that in the price level cause __ in aggregate quantity supplied.

Wage agreements may cause costs to be flexible than prices so that in the price level cause __ in aggregate quantity supplied.