Question 1

In long-run equilibrium,

Accepted Answer

A) actual output can exceed potential output 
B) potential output can exceed actual output 
C) actual output must equal potential output 
D) actual price levels can exceed expected price levels 
E) expected price levels can exceed actual price levels 
A) actual output can exceed potential output 
B) potential output can exceed actual output 
C) actual output must equal potential output 
D) actual price levels can exceed expected price levels 
E) expected price levels can exceed actual price levels

Question 2

Exhibit 10-2  
-In Exhibit 10-2,if P3 is the prevailing price level,then

Accepted Answer

A) the expected price level is less than the actual price level 
B) there is a contractionary gap 
C) the price level will rise 
D) the actual unemployment rate is above the natural rate 
E) potential output is greater than actual output 
A) the expected price level is less than the actual price level 
B) there is a contractionary gap 
C) the price level will rise 
D) the actual unemployment rate is above the natural rate 
E) potential output is greater than actual output

Question 3

The aggregate supply curve reflects the relationship between the

Accepted Answer

A) price of a particular good and the quantity supplied by all firms producing that good 
B) price of a particular good and the quantity supplied by the aggregate economy 
C) price level and the quantity of all goods supplied in the economy 
D) price level and the quantity purchased of all goods in the economy 
E) price level and investment spending 
A) price of a particular good and the quantity supplied by all firms producing that good 
B) price of a particular good and the quantity supplied by the aggregate economy 
C) price level and the quantity of all goods supplied in the economy 
D) price level and the quantity purchased of all goods in the economy 
E) price level and investment spending

Question 4

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 5

Exhibit 10-7  
-The movement in Exhibit 10-7 could be caused by

Accepted Answer

A) a decrease in the real wage 
B) an increase in the economy's capital stock 
C) the actions of a cartel of resource suppliers 
D) a decrease in consumer spending 
E) an increase in labor productivity 
A) a decrease in the real wage 
B) an increase in the economy's capital stock 
C) the actions of a cartel of resource suppliers 
D) a decrease in consumer spending 
E) an increase in labor productivity

Question 6

At the potential level of output,there is no structural unemployment.

Accepted Answer

A) True 
 B)False

Question 7

An adverse supply shock would shift the

Accepted Answer

A) short-run aggregate supply curve outward but not the long-run aggregate supply curve 
B) long-run aggregate supply curve outward but not the short-run aggregate supply curve 
C) long-run aggregate supply curve inward but not the short-run aggregate supply curve 
D) short-run aggregate supply curve inward but not the long-run aggregate supply curve 
E) long-run and short-run aggregate supply curves inward 
A) short-run aggregate supply curve outward but not the long-run aggregate supply curve 
B) long-run aggregate supply curve outward but not the short-run aggregate supply curve 
C) long-run aggregate supply curve inward but not the short-run aggregate supply curve 
D) short-run aggregate supply curve inward but not the long-run aggregate supply curve 
E) long-run and short-run aggregate supply curves inward

Question 8

If workers and other resource suppliers negotiate higher resource payments,which of the following is true?

Accepted Answer

A) The long-run aggregate supply curve will shift rightward. 
B) There will be a leftward movement along a fixed short-run aggregate supply curve. 
C) The long-run aggregate supply curve will shift leftward. 
D) The short-run aggregate supply curve will shift rightward. 
E) Higher resource payments will cause the price level to rise. 
A) The long-run aggregate supply curve will shift rightward. 
B) There will be a leftward movement along a fixed short-run aggregate supply curve. 
C) The long-run aggregate supply curve will shift leftward. 
D) The short-run aggregate supply curve will shift rightward. 
E) Higher resource payments will cause the price level to rise.

Question 9

If the actual price level is less than the expected price level reflected in long-term contracts,firm owners will find production more profitable than they had expected.

Accepted Answer

A) True 
 B)False

Question 10

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 equal 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) Structural unemployment would be equal to zero. 
A) The actual unemployment rate would equal 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) Structural unemployment would be equal to zero.

Question 11

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 the long-run equilibrium?

Accepted Answer

A) A 
B) B 
C) C 
D) I 
E) J 
A) A 
B) B 
C) C 
D) I 
E) J

Question 12

Exhibit 10-7  
-In the short run,real and nominal GDP will both decrease whenever

Accepted Answer

A) aggregate demand decreases,but not always when aggregate supply decreases 
B) aggregate supply decreases,but not always when aggregate demand decreases 
C) either aggregate demand or supply decreases 
D) aggregate supply decreases 
E) aggregate supply decreases along a constant aggregate demand curve 
A) aggregate demand decreases,but not always when aggregate supply decreases 
B) aggregate supply decreases,but not always when aggregate demand decreases 
C) either aggregate demand or supply decreases 
D) aggregate supply decreases 
E) aggregate supply decreases along a constant aggregate demand curve

Question 13

Suppose firms are continually surprised by higher-than-expected price levels.Which of the following might be true?

Accepted Answer

A) the consumer price index will rise 
B) potential output will increase 
C) potential output will decrease 
D) actual output will be less than potential output in the long run 
E) actual output will exceed potential output in the short run 
A) the consumer price index will rise 
B) potential output will increase 
C) potential output will decrease 
D) actual output will be less than potential output in the long run 
E) actual output will exceed potential output in the short run

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Stagflation is defined as

Accepted Answer

A) decreased output accompanied by a higher price level 
B) decreased output accompanied by a lower price level 
C) increased output accompanied by a lower price level 
D) increased output accompanied by a higher price level 
E) stagnation in the rate of inflation (i.e.,no appreciable change in the rate of inflation for a year or more) 
A) decreased output accompanied by a higher price level 
B) decreased output accompanied by a lower price level 
C) increased output accompanied by a lower price level 
D) increased output accompanied by a higher price level 
E) stagnation in the rate of inflation (i.e.,no appreciable change in the rate of inflation for a year or more)

Question 16

Compensation is usually negotiated in terms of the nominal wage because wage agreements are based on expected price levels.

Accepted Answer

A) True 
 B)False

Question 17

Between 1994 and 2004,Jack's salary increased from $100,000 to $200,000 per year and the price index increased from 100 to 300 during the same period.Which of the following statements best describes Jack's situation?

Accepted Answer

A) his real income and money income have both increased 
B) his real income increased and money income decreased 
C) his real income and money income both decreased 
D) his real income decreased and money income increased 
E) his real income and money income remained unchanged 
A) his real income and money income have both increased 
B) his real income increased and money income decreased 
C) his real income and money income both decreased 
D) his real income decreased and money income increased 
E) his real income and money income remained unchanged

Question 18

In the short run,there is a positive relationship between

Accepted Answer

A) inflation and unemployment 
B) inflation and real GDP 
C) the actual price level and aggregate quantity supplied 
D) the actual price level and unemployment 
E) the actual price level and consumption spending 
A) inflation and unemployment 
B) inflation and real GDP 
C) the actual price level and aggregate quantity supplied 
D) the actual price level and unemployment 
E) the actual price level and consumption spending

Question 19

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 20

Which of the following types of unemployment can exist in an economy that is at its potential output level?

Accepted Answer

A) cyclical unemployment only 
B) structural unemployment only 
C) frictional,cyclical,and seasonal unemployment only 
D) frictional,seasonal,and structural unemployment only 
E) there will be no unemployment in an economy that is at the potential output level 
A) cyclical unemployment only 
B) structural unemployment only 
C) frictional,cyclical,and seasonal unemployment only 
D) frictional,seasonal,and structural unemployment only 
E) there will be no unemployment in an economy that is at the potential output level

Exam 11: Aggregate Supply

In long-run equilibrium,

Exhibit 10-2 -In Exhibit 10-2,if P3 is the prevailing price level,then

The aggregate supply curve reflects the relationship between the

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

Exhibit 10-7 -The movement in Exhibit 10-7 could be caused by

At the potential level of output,there is no structural unemployment.

An adverse supply shock would shift the

If workers and other resource suppliers negotiate higher resource payments,which of the following is true?

If the actual price level is less than the expected price level reflected in long-term contracts,firm owners will find production more profitable than they had expected.

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

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 the long-run equilibrium?

Exhibit 10-7 -In the short run,real and nominal GDP will both decrease whenever

Suppose firms are continually surprised by higher-than-expected price levels.Which of the following might be true?

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

Stagflation is defined as

Compensation is usually negotiated in terms of the nominal wage because wage agreements are based on expected price levels.

Between 1994 and 2004,Jack's salary increased from $100,000 to $200,000 per year and the price index increased from 100 to 300 during the same period.Which of the following statements best describes Jack's situation?

In the short run,there is a positive relationship between

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

Which of the following types of unemployment can exist in an economy that is at its potential output level?

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 10-2 -In Exhibit 10-2,if P₃ is the prevailing price level,then

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 the long-run equilibrium?