Question 1

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

Accepted Answer

A) an increase in the average workweek 
B) an improvement in technology 
C) a civil war 
D) a decrease in aggregate demand 
E) accelerated depreciation allowances to encourage capital formation 
A) an increase in the average workweek 
B) an improvement in technology 
C) a civil war 
D) a decrease in aggregate demand 
E) accelerated depreciation allowances to encourage capital formation

Question 2

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 3

Aggregate supply reflects billions of production decisions made by

Accepted Answer

A) consumers when they decide which products to purchase 
B) households and firms,because they each demand goods and services 
C) the largest firms and largest households 
D) households,which demand resources,and firms,which supply resources 
E) resource suppliers and firms 
A) consumers when they decide which products to purchase 
B) households and firms,because they each demand goods and services 
C) the largest firms and largest households 
D) households,which demand resources,and firms,which supply resources 
E) resource suppliers and firms

Question 4

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 very poor measure of the expected real wage. 
C) The unemployment rate is about 4 to 6 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 very poor measure of the expected real wage. 
C) The unemployment rate is about 4 to 6 percent. 
D) The economy is producing its maximum sustainable output. 
E) The actual price level equals the expected price level.

Question 5

Suppose that the actual and expected price levels are initially equal,and that the expected price level rises.Which of the following will occur over the long run? (Hint: Recall the actual price level is on the vertical axis.)

Accepted Answer

A) The economy will move rightward along the short-run aggregate supply curve. 
B) The economy will move leftward along the short-run aggregate supply curve. 
C) The short-run aggregate supply curve will shift to the right. 
D) The short-run aggregate supply curve will shift to the left. 
E) The short-run aggregate supply curve will become flatter. 
A) The economy will move rightward along the short-run aggregate supply curve. 
B) The economy will move leftward along the short-run aggregate supply curve. 
C) The short-run aggregate supply curve will shift to the right. 
D) The short-run aggregate supply curve will shift to the left. 
E) The short-run aggregate supply curve will become flatter.

Question 6

Exhibit 10-2  
-In Exhibit 10-2,an expansionary gap would be represented by the distance

Accepted Answer

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

Question 7

Which of the following is true in the long run?

Accepted Answer

A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is vertical. 
C) The actual price level is greater than the expected price level. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the long-run aggregate supply curve. 
A) The aggregate demand curve determines the level of potential output. 
B) The long-run aggregate supply curve is vertical. 
C) The actual price level is greater than the expected price level. 
D) Cyclical unemployment is between 5 percent and 6 percent. 
E) The price level is determined entirely by the long-run aggregate supply curve.

Question 8

For the purpose of aggregate supply analysis,the long run is the period of time during which

Accepted Answer

A) aggregate supply adjusts to equal aggregate demand 
B) excess aggregate supply is bought 
C) excess aggregate demand is fulfilled 
D) real wages are constant 
E) all resource prices can be varied 
A) aggregate supply adjusts to equal aggregate demand 
B) excess aggregate supply is bought 
C) excess aggregate demand is fulfilled 
D) real wages are constant 
E) all resource prices can be varied

Question 9

Which of the following is true about real and nominal wages?

Accepted Answer

A) The nominal wage will be constant only if the inflation rate is constant. 
B) The real wage will be constant only if the inflation rate is constant. 
C) Changes in the nominal wage will be the same as changes in the real wage only if the price level is constant. 
D) The real wage will be constant only if the price level is constant. 
E) The real wage will be constant only if the nominal wage is constant. 
A) The nominal wage will be constant only if the inflation rate is constant. 
B) The real wage will be constant only if the inflation rate is constant. 
C) Changes in the nominal wage will be the same as changes in the real wage only if the price level is constant. 
D) The real wage will be constant only if the price level is constant. 
E) The real wage will be constant only if the nominal wage is constant.

Question 10

As an expansionary gap is closed in the long run,

Accepted Answer

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

Question 11

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 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

If nominal wages are sticky in the downward direction,

Accepted Answer

A) unemployment may persist for long periods of time 
B) shortages of labor may persist for long periods of time 
C) increases in real wages will happen too quickly to affect unemployment 
D) nominal wage increases will reduce the price level 
E) decreases in nominal wages will increase the inflation rate 
A) unemployment may persist for long periods of time 
B) shortages of labor may persist for long periods of time 
C) increases in real wages will happen too quickly to affect unemployment 
D) nominal wage increases will reduce the price level 
E) decreases in nominal wages will increase the inflation rate

Question 13

Given the long-run aggregate supply curve,the aggregate demand curve determines

Accepted Answer

A) the price level and the output level 
B) the price level but not the output level 
C) the output level but not the price level 
D) neither the price level nor the output level 
E) the income level but not the output level 
A) the price level and the output level 
B) the price level but not the output level 
C) the output level but not the price level 
D) neither the price level nor the output level 
E) the income level but not the output level

Question 14

Exhibit 10-3  
-Consider Exhibit 10-3.The short-run equilibrium output is Y1.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 10-4  
-The graph in Exhibit 10-4,when aggregate supply is AS,the equilibrium output and price level will be Y2 and P2.

Accepted Answer

A) True 
 B)False

Question 16

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 describes the current situation for this economy?

Accepted Answer

A) an expansionary gap exists 
B) a recessionary gap exists 
C) a long-run equilibrium exists 
D) an employment gap exists 
E) an economic growth gap exists 
A) an expansionary gap exists 
B) a recessionary gap exists 
C) a long-run equilibrium exists 
D) an employment gap exists 
E) an economic growth gap exists

Question 17

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

Accepted Answer

A) an increase 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) a decrease in the price level 
E) an increase in the price level 
A) an increase 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) a decrease in the price level 
E) an increase in the price level

Question 18

Potential output is the amount produced when

Accepted Answer

A) firms' and workers' expectations about the price level are realized 
B) the actual price level is higher than workers expected 
C) firms and workers have the same expectations about the price level 
D) the actual price level remains constant 
E) the actual price level is higher than firms expected 
A) firms' and workers' expectations about the price level are realized 
B) the actual price level is higher than workers expected 
C) firms and workers have the same expectations about the price level 
D) the actual price level remains constant 
E) the actual price level is higher than firms expected

Question 19

Suppose that the actual and expected price levels are initially equal,and that the expected price level falls.Which of the following will occur over the long run? (Hint: Recall the actual price level is on the vertical axis.)

Accepted Answer

A) The economy will move rightward along the short-run aggregate supply curve. 
B) The economy will move leftward along the short-run aggregate supply curve. 
C) The short-run aggregate supply curve will shift to the right. 
D) The short-run aggregate supply curve will shift to the left. 
E) The short-run aggregate supply curve will become flatter. 
A) The economy will move rightward along the short-run aggregate supply curve. 
B) The economy will move leftward along the short-run aggregate supply curve. 
C) The short-run aggregate supply curve will shift to the right. 
D) The short-run aggregate supply curve will shift to the left. 
E) The short-run aggregate supply curve will become flatter.

Question 20

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.

Exam 11: Aggregate Supply

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

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

Aggregate supply reflects billions of production decisions made by

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

Suppose that the actual and expected price levels are initially equal,and that the expected price level rises.Which of the following will occur over the long run? (Hint: Recall the actual price level is on the vertical axis.)

Exhibit 10-2 -In Exhibit 10-2,an expansionary gap would be represented by the distance

Which of the following is true in the long run?

For the purpose of aggregate supply analysis,the long run is the period of time during which

Which of the following is true about real and nominal wages?

As an expansionary gap is closed in the long run,

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 the long-run equilibrium?

If nominal wages are sticky in the downward direction,

Given the long-run aggregate supply curve,the aggregate demand curve determines

Exhibit 10-3 -Consider Exhibit 10-3.The short-run equilibrium output is Y1.

Exhibit 10-4 -The graph in Exhibit 10-4,when aggregate supply is AS,the equilibrium output and price level will be Y2 and P2.

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 describes the current situation for this economy?

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

Potential output is the amount produced when

Suppose that the actual and expected price levels are initially equal,and that the expected price level falls.Which of the following will occur over the long run? (Hint: Recall the actual price level is on the vertical axis.)

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

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

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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 the long-run equilibrium?

Exhibit 10-3 -Consider Exhibit 10-3.The short-run equilibrium output is Y₁.

Exhibit 10-4 -The graph in Exhibit 10-4,when aggregate supply is AS,the equilibrium output and price level will be Y₂ and P₂.

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 describes the current situation for this economy?