Question 1

The potential level of output can be altered by changes in

Accepted Answer

A) the actual price level 
B) the expected price level 
C) aggregate demand 
D) real GDP 
E) a nation's stock of capital 
A) the actual price level 
B) the expected price level 
C) aggregate demand 
D) real GDP 
E) a nation's stock of capital

Question 2

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 3

An expansionary gap is equal to

Accepted Answer

A) real GDP minus nominal GDP 
B) nominal GDP minus real GDP 
C) actual short-run output minus potential output 
D) this period's nominal GDP minus last period's nominal GDP 
E) this period's real GDP minus last period's real GDP 
A) real GDP minus nominal GDP 
B) nominal GDP minus real GDP 
C) actual short-run output minus potential output 
D) this period's nominal GDP minus last period's nominal GDP 
E) this period's real GDP minus last period's real GDP

Question 4

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 5

Exhibit 10-12  
-Consider Exhibit 10-12.Aggregate demand is represented by AD0 and the aggregate supply is AS120 since the expected price level is 120.Which of the following identifies the size of the recessionary gap?

Accepted Answer

A) FB 
B) GB 
C) JB 
D) EA 
E) DK 
A) FB 
B) GB 
C) JB 
D) EA 
E) DK

Question 6

Exhibit 10-2  
-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 7

Exhibit 10-12  
-Consider Exhibit 10-12.Aggregate demand is represented by AD0 and the aggregate supply is AS100 since the expected price level is 100.Which of the following identifies the size of the expansionary gap?

Accepted Answer

A) FB 
B) GB 
C) JB 
D) EA 
E) HI 
A) FB 
B) GB 
C) JB 
D) EA 
E) HI

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Suppose this year's inflation rate is 4 percent,which is greater than the 2 percent everyone expected.Which of the following is true?

Accepted Answer

A) real GDP will increase 
B) the unemployment rate will probably rise 
C) potential output will remain the same 
D) the short-run aggregate supply curve will shift to the right 
E) there will be a leftward movement along a given short-run aggregate supply curve 
A) real GDP will increase 
B) the unemployment rate will probably rise 
C) potential output will remain the same 
D) the short-run aggregate supply curve will shift to the right 
E) there will be a leftward movement along a given short-run aggregate supply curve

Question 10

The amount by which actual output falls short of potential output is called an contractionary gap.

Accepted Answer

A) True 
 B)False

Question 11

An increase in short-run aggregate supply could decrease nominal GDP.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 10-10  
-The graph in Exhibit 10-10 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 13

Exhibit 10-10  
-The movement in Exhibit 10-10 could be caused by a(n)

Accepted Answer

A) decrease in the size of the labor force 
B) decrease in the price level 
C) positive level of net investment 
D) increase in autonomous consumption 
E) decrease in autonomous consumption 
A) decrease in the size of the labor force 
B) decrease in the price level 
C) positive level of net investment 
D) increase in autonomous consumption 
E) decrease in autonomous consumption

Question 14

Exhibit 10-6  
-In Exhibit 10-6,the distance between Y1 and Y2 is called

Accepted Answer

A) an expansionary gap 
B) a contractionary gap 
C) an increase in potential output 
D) a decrease in potential output 
E) the natural rate of unemployment 
A) an expansionary gap 
B) a contractionary gap 
C) an increase in potential output 
D) a decrease in potential output 
E) the natural rate of unemployment

Question 15

As a contractionary gap is closed in the long run by firms' actions,

Accepted Answer

A) nominal and real GDP both decline 
B) nominal and real GDP both increase 
C) nominal GDP increases but real GDP declines 
D) nominal GDP declines but real GDP increases 
E) real GDP increases,but nominal GDP can increase,decrease,or remain the same 
A) nominal and real GDP both decline 
B) nominal and real GDP both increase 
C) nominal GDP increases but real GDP declines 
D) nominal GDP declines but real GDP increases 
E) real GDP increases,but nominal GDP can increase,decrease,or remain the same

Question 16

Which of the following is generally true of nominal wages?

Accepted Answer

A) In the long run,nominal and real wages tend to be equal. 
B) Nominal wages are more flexible downward than upward. 
C) Nominal wages are more flexible than prices. 
D) Sustained and continuous (cyclical)unemployment suggests nominal wages do not fall quickly. 
E) Nominal wages do not rise during labor shortages. 
A) In the long run,nominal and real wages tend to be equal. 
B) Nominal wages are more flexible downward than upward. 
C) Nominal wages are more flexible than prices. 
D) Sustained and continuous (cyclical)unemployment suggests nominal wages do not fall quickly. 
E) Nominal wages do not rise during labor shortages.

Question 17

Increases in the costs of producing each level of output will cause a rightward shift of the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 18

If the actual price level is less than 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,because they are making less profit than they had expected,will increase 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,because they are making less profit than they had expected,will increase 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 19

Supply shocks are unexpected events that affect aggregate supply.

Accepted Answer

A) True 
 B)False

Question 20

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 good measure of the expected real wage. 
C) The unemployment rate is about 2 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 good measure of the expected real wage. 
C) The unemployment rate is about 2 percent. 
D) The economy is producing its maximum sustainable output. 
E) The actual price level equals the expected price level.

Exam 11: Aggregate Supply

The potential level of output can be altered by changes in

The nominal wage represents

An expansionary gap is equal to

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

Exhibit 10-12 -Consider Exhibit 10-12.Aggregate demand is represented by AD0 and the aggregate supply is AS120 since the expected price level is 120.Which of the following identifies the size of the recessionary gap?

Exhibit 10-2 -Aggregate supply describes the relationship between

Exhibit 10-12 -Consider Exhibit 10-12.Aggregate demand is represented by AD0 and the aggregate supply is AS100 since the expected price level is 100.Which of the following identifies the size of the expansionary gap?

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

Suppose this year's inflation rate is 4 percent,which is greater than the 2 percent everyone expected.Which of the following is true?

The amount by which actual output falls short of potential output is called an contractionary gap.

An increase in short-run aggregate supply could decrease nominal GDP.

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

Exhibit 10-10 -The movement in Exhibit 10-10 could be caused by a(n)

Exhibit 10-6 -In Exhibit 10-6,the distance between Y1 and Y2 is called

As a contractionary gap is closed in the long run by firms' actions,

Which of the following is generally true of nominal wages?

Increases in the costs of producing each level of output will cause a rightward shift of the short-run aggregate supply curve.

If the actual price level is less than the expected price level reflected in long-term contracts,

Supply shocks are unexpected events that affect aggregate supply.

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

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 10-12 -Consider Exhibit 10-12.Aggregate demand is represented by AD₀ and the aggregate supply is AS₁₂₀ since the expected price level is 120.Which of the following identifies the size of the recessionary gap?

Exhibit 10-12 -Consider Exhibit 10-12.Aggregate demand is represented by AD₀ and the aggregate supply is AS₁₀₀ since the expected price level is 100.Which of the following identifies the size of the expansionary gap?

Exhibit 10-6 -In Exhibit 10-6,the distance between Y₁ and Y₂ is called