Deck 10: Bringing in the Supply Side: Unemployment and Inflation?

Question 1

The 2006-2008 period can be accurately described as a time of stagflation.

Answer 1

False

Question 2

Profit per unit can be expressed as price - cost per unit.

Answer 2

True

Question 3

The money wage rate has little effect on the supply curve.It mainly affects the aggregate demand curve.

Answer 3

False

Question 4

If the selling price falls and input costs are fixed,profit margins will increase.

Question 5

Demand-side changes explain everything about stagflation.

Question 6

Input prices are fixed for a period of time and this causes firms to increase production as prices increase.

Question 7

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Question 8

The slope of the aggregate supply curve decreases as total output increases.

Question 9

If wages or prices of other inputs change,the aggregate supply curve will shift to another position.

Question 10

The aggregate supply curve is the relationship between the price level and the quantity of real GDP purchased.

Question 11

Wage increases are resisted by firms because they decrease profits.

Question 12

An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

Question 13

Labor contracts often fix wages for more than one year.

Question 14

Wage decreases lead to a decrease in aggregate quantity supplied.

Question 15

A change in the aggregate price level moves the economy along a given aggregate supply curve.

Question 16

Like the supply curve for individual goods and services,the aggregate supply curve slopes upward and to the right.

Question 17

Supply-side economics concerns itself with the interaction between demand and supply,the price level,and real GDP.

Question 18

Decreasing profit margins indicate a need to increase production in an economy.

Question 19

The aggregate supply curve slopes upward because as price rises the quantity of output supplied rises.

Question 20

The aggregate supply curve is a fixed point representing potential GDP.

Question 21

A recessionary gap exists when aggregate demand is above the full employment level of output.

Question 22

Economists do not agree on why wages are more rigid now than they were before World War II.

Question 23

GDP in excess of potential GDP will shift the aggregate supply curve to the left and the price level will increase.

Question 24

Increases in the price of imported oil in 2011 led to a leftward shift of the aggregate supply curve.

Question 25

A price level lower than equilibrium will cause quantity supplied to exceed quantity demanded.

Question 26

When equilibrium GDP is greater than potential GDP,jobs are plentiful and labor is in great demand.

Question 27

College graduates looking for jobs were less fortunate in 2007 than graduates in 2009.

Question 28

An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment.

Question 29

An improvement in productivity will usually increase profits.

Question 30

Aggregate supply grows over time because of growing consumer and government spending.

Question 31

When OPEC cut energy production in 1973,the aggregate supply curve shifted outward.

Question 32

The recessionary gap of the 1990s in Japan led to decreases in the price level.

Question 33

Increases in the prices of imported energy in 2002-2008 caused the aggregate supply curve to shift inward.

Question 34

If short-run equilibrium GDP is above potential GDP,prices will eventually rise.

Question 35

Inflation reduces the multiplier effect by reducing consumers' wealth and purchasing power.

Question 36

A vertical aggregate supply curve increases the size of the multiplier effect.

Question 37

If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion,the price level will rise.

Question 38

When equilibrium GDP is below potential GDP,jobs are plentiful and unemployment is low.

Question 39

In our modern economy,the adjustment process necessary to eliminate a recessionary gap is very rapid.

Question 40

Recessionary gaps are associated with output below potential and high unemployment rates.

Question 41

For most firms in the economy,the largest part of factor costs is the cost of

A) labor.
B) capital.
C) property and machinery.
D) land and natural resources.

Question 42

When the expenditure schedule is too high,the result is a(n)

A) unemployment surplus.
B) inflationary gap.
C) recessionary gap.
D) budgetary gap.

Question 43

Stabilization policy may be necessary to modify or counteract volatile changes in aggregate demand.

Question 44

In spite of the fact that unemployment rates were at a 30-year low in 1996-2000,the United States economy also experienced

A) declining inflation.
B) balance of payments surpluses.
C) large budget deficits.
D) low growth.

Question 45

Over time,aggregate demand and aggregate supply grow by the same amount.

Question 46

Recessionary gap arises when

A) inventory stock falls.
B) government spending increases.
C) when the general price level increases.
D) there is less spending than desired.

Question 47

Economists generally assume that there is a short-run trade-off between

A) output and employment.
B) inflation and employment.
C) deflation and unemployment.
D) inflation and unemployment.
E) output and growth.

Question 48

The concept of aggregate supply refers to a

A) fixed number of output.
B) list of products demanded.
C) schedule of output.
D) schedule of production costs.

Question 49

If the data show that periods of high economic growth rate accompanied by high inflation rates,then changes in aggregate demand are the primary source of economic fluctuations.

Question 50

From 2005 to 2006 the U.S.economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

Question 51

"Stagflation" refers to the unwelcome combination of

A) inflation and rising prices.
B) deflation and unemployment.
C) inflation and unemployment.
D) inflation and expansion.

Question 52

When the expenditure schedule is too low,the result is a(n)

A) unemployment surplus.
B) inflationary gap.
C) recessionary gap.
D) budgetary gap.

Question 53

If the economy experiences inflation and economic growth,this means that aggregate demand grows by more than aggregate supply.

Question 54

For a given growth rate in aggregate supply,slower growth in aggregate demand will lead to lower inflation.

Question 55

In the period from 1996-2000,the United States economy experienced the unusual combination of

A) high unemployment and high inflation.
B) high unemployment and low inflation.
C) low unemployment and high inflation.
D) low unemployment and low inflation.

Question 56

The existence of an inflationary gap or an recessionary gap depends on the

A) aggregate supply only.
B) expenditure schedule.
C) leakages schedule.
D) injections schedule.
E) aggregate demand and aggregate supply schedules.

Question 57

The combination of high unemployment and high inflation is termed

A) reflation.
B) stagflation.
C) depression.
D) unflation.

Question 58

The major cost of production in the economy is

A) interest expense.
B) capital costs.
C) rents.
D) profits.
E) wages.

Question 59

Stabilization policy may be necessary to slow down the speed of the adjustment process.

Question 60

In 1973,the U.S.experienced a decline in output and high inflation.

Question 61

A decrease in the price of resources will cause the aggregate supply curve to

A) shift outward.
B) shift inward.
C) become flatter.
D) become steeper.

Question 62

Aggregate supply can be thought of as

A) a fixed amount of output.
B) unrelated to the price level.
C) a schedule of output at different price levels.
D) the volume of goods at the ends of the production possibilities curve.

Question 63

A company succumbs to a wage increase demand without any changes in the productivity of labor,price of the product,and the total output sold.Which of the following would happen?

A) Total revenue of the company will fall.
B) Investment by the company will increase.
C) Profit per unit of the product will fall.
D) Average profit per unit will increase.

Question 64

The aggregate supply curve slopes

A) downward because firms can sell more at lower prices.
B) downward because firms can hire more workers at lower prices.
C) upward because firms want to hire more workers at higher wage levels.
D) upward because firms can hire labor at fixed wages for short-run periods.

Question 65

As the U.S.labor force grows and the nation's capital stock is augmented by investment,the

A) price level will rise.
B) aggregate supply curve shifts inward.
C) aggregate supply curve shifts outward.
D) aggregate supply curve becomes steeper.

Question 66

Resource prices are fixed for some period of time because

A) some workers enter into long-term contracts.
B) firms purchase raw materials on set-price contracts.
C) many workers get pay increases only once a year.
D) All of the above are correct.

Question 67

An increase in wages will cause the aggregate supply curve to

A) shift outward.
B) shift inward.
C) become flatter.
D) become steeper.

Question 68

If profit per unit equals (price - cost per unit)and costs are temporarily fixed,then the aggregate supply curve will have

A) a basic "U" shape.
B) a negative slope.
C) a positive slope.
D) All of the above could be correct.

Question 69

If resource prices are fixed and the selling price rises,then

A) profits will decrease.
B) profits will increase.
C) profits will remain constant.
D) both profits and output will decrease.

Question 70

The aggregate supply curve is

A) a schedule showing the relationship between the price level and the quantity of real GDP supplied.
B) usually upward sloping.
C) relatively flat at low levels of resource utilization.
D) All of the above are correct.

Question 71

The aggregate supply curve normally

A) slopes downward and to the right due to higher resource prices.
B) has a horizontal slope equal to zero.
C) is very steep in the lower portion and flatter in the upper portion.
D) slopes upward to the right due to short-run fixed costs of production.

Question 72

As a result of the war in Afghanistan,the population of Afghanistan as well as their capital stock was reduced.This can be illustrated by aggregate supply curve

A) shifting outward.
B) becoming flatter.
C) shifting inward.
D) becoming more elastic.

Question 73

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

A) vertical.
B) horizontal.
C) downward sloping.
D) upward sloping.

Question 74

The slope of the aggregate supply curve is

A) perfectly vertical.
B) perfectly horizontal.
C) upward.
D) downward.

Question 75

The aggregate supply curve is drawn with

A) the price level on the vertical axis and nominal GDP on the horizontal.
B) nominal GDP on the vertical axis and real GDP on the horizontal.
C) the price level on the vertical axis and real GDP on the horizontal.
D) real GDP on the horizontal and the rate of inflation on the vertical.

Question 76

The slope of the aggregate supply curve increases as output increases because

A) the cost of resource-use increases as potential is reached.
B) consumers are willing to pay more as output expands.
C) firms substitute capital for labor as prices increase.
D) firms substitute capital for labor as capacity is reached.

Question 77

An economist who claims that an increase in government spending would result mainly in a higher price level believes the economy is operating where

A) the MPC is small.
B) the MPC is large.
C) aggregate supply curve is flat.
D) aggregate supply curve is steep.

Question 78

The aggregate supply curve is

A) generally flatter as the level of resource use rises.
B) never vertical, even at full employment.
C) relatively flat at low levels of output.
D) relatively steep at low levels of output.

Question 79

To calculate a firm's per unit of output profit,it is necessary to subtract

A) price from cost per unit.
B) price from resource costs.
C) cost per unit from product price.
D) cost per unit from cost of resources.

Question 80

The aggregate supply curve shows for each price level the

A) total amount of money supply at each price level.
B) amount of frictional unemployment that will occur.
C) amount of structural unemployment that will occur.
D) quantity of goods and services that businesses are willing to produce.