Question 1

When the price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier. Why?

Accepted Answer

As long as the aggregate supply curve sl...

Question 2

Suppose we observe an economy experience an economic expansion and high inflation. This means the expansion is attributed to

Accepted Answer

A)   growth in aggregate demand.
B)   growth in aggregate supply.
C)   a reduction in aggregate demand.
D)   a reduction in aggregate supply.E) A) and D)
F) B) and C)

Question 3

The slope of the aggregate supply curve is

Accepted Answer

A)   perfectly vertical.
B)   perfectly horizontal.
C)   upward.
D)   downward.E) A) and C)
F) A) and B)

Question 4

Which of the following events shifts the short-run aggregate supply curve to the right?

Accepted Answer

A)   An increase in government spending on military equipment
B)   A drop in oil prices
C)   An increase in price expectations
D)   None of the above is correct.E) B) and D)
F) A) and B)

Question 5

Figure 10-1

If the price level in Figure 10-1 were 110,

Accepted Answer

A)   inventories would be accumulating.
B)   firms would have to lower their prices.
C)   aggregate quantity demanded would equal aggregate quantity supplied.
D)   shortages of goods would exist.E) A) and D)
F) B) and C)

Question 6

Demand-side changes explain everything about stagflation.

Accepted Answer

A) True 
 B)False

Question 7

A period of stagflation is part of the normal aftermath of a period of excessive aggregate demand.

Accepted Answer

A) True 
 B)False

Question 8

Assume an economy with an upward-sloping aggregate supply curve and an MPC of 0.80. An increase in investment spending of $50 billion will most likely increase total income by

Accepted Answer

A)   $200 billion.
B)   $40 billion.
C)   more than $200 billion.
D)   more than $50 billion but less than $250 billion.E) A) and B)
F) C) and D)

Question 9

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

Accepted Answer

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

Question 10

The usual results of an adverse supply shock are

Accepted Answer

A)   a rise in prices and a fall in output.
B)   a fall in prices and a rise in output.
C)   increased growth and lower inflation.
D)   higher net exports.E) B) and C)
F) None of the above

Question 11

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

Accepted Answer

A)   profits will decrease.
B)   profits will increase.
C)   profits will remain constant.
D)   both profits and output will decrease.E) None of the above
F) A) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Many economists are in favor of increased immigration of adult foreigners who possess high levels of skills and education. Why?

Accepted Answer

A)   Economists are very caring individuals.
B)   Economists believe this is a way to increase understanding among different ethnic groups.
C)   Economists believe foreigners will work cheaper.
D)   Economists believe this will increase aggregate supply.E) C) and D)
F) None of the above

Question 14

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

Accepted Answer

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.E) B) and C)
F) None of the above

Question 15

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)   short-run fluctuations in the economy.
B)   the effects of macroeconomic policy on the prices of individual goods.
C)   productivity and economic growth.
D)   None of the above is correct.E) None of the above
F) B) and D)

Question 16

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

Accepted Answer

A)   inflation whenever supply increases.
B)   production below potential GDP.
C)   production above potential GDP.
D)   rapid price increases when demand changes.E) A) and B)
F) C) and D)

Question 17

Which of the following shifts short-run aggregate supply right?

Accepted Answer

A)   An increase in the minimum wage
B)   An increase in immigration from abroad
C)   An increase in the price of oil
D)   An increase in the actual price levelE) A) and B)
F) B) and C)

Question 18

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

Accepted Answer

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

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 26: Bringing in the Supply Side: Unemployment and Inflation

If the price level does not fall or only falls very slowly, then the result will be a prolonged period of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following shifts short-run aggregate supply right?

Correct AnswerverifiedShow Answer

Suppose we observe an economy experience an economic expansion and high inflation. This means the expansion is attributed to

Correct AnswerverifiedShow Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Correct AnswerverifiedShow Answer

Which of the following events shifts the short-run aggregate supply curve to the right?

Correct AnswerverifiedShow Answer

Figure 10-1 If the price level in Figure 10-1 were 110,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The slope of the aggregate supply curve is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Many economists are in favor of increased immigration of adult foreigners who possess high levels of skills and education. Why?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume an economy with an upward-sloping aggregate supply curve and an MPC of 0.80. An increase in investment spending of $50 billion will most likely increase total income by

Correct AnswerverifiedShow Answer

Demand-side changes explain everything about stagflation.

Correct AnswerverifiedShow Answer

A period of stagflation is part of the normal aftermath of a period of excessive aggregate demand.

Correct AnswerverifiedShow Answer

When the price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier. Why?

Correct AnswerverifiedAs long as the aggregate supply curve sl...View AnswerShow Answer

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

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The usual results of an adverse supply shock are

Correct AnswerverifiedShow Answer

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As long as the aggregate supply curve sl...
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