Question 1

Which of the following allegedly contributed to the stagflation in the mid-1970s?

Accepted Answer

A)   Appreciation of the dollar.
B)   A sharp drop in the prices of farm products.
C)   A dramatic increase in oil prices.
D)   Rising productivity in manufacturing.E) A) and C)
F) A) and B)

Question 2

Suppose the full employment level of real output (Q) for a hypothetical economy is $500,the price level (P) initially is 100,and prices and wages are flexible both upward and downward.Use the following short-run aggregate supply schedules to answer the question.  Refer to the information given.In the long run,an increase in the price level from 100 to 125 will:

Accepted Answer

A)   increase real output from $500 to $560.
B)   decrease real output from $500 to $440.
C)   change the aggregate supply schedule from (a) to (c) and result in an equilibrium level of real output of $560.
D)   change the aggregate supply schedule from (a) to (b) and result in an equilibrium level of real output of $500.E) B) and C)
F) C) and D)

Question 3

In the absence of unexpected shocks,the economy will tend to experience:

Accepted Answer

A)   positive,noninflationary growth.
B)   no changes in output or prices.
C)   positive growth with mild amounts of deflation.
D)   positive growth with mild amounts of inflation.E) All of the above
F) None of the above

Question 4

Inflation accompanied by falling real output and employment is known as:

Accepted Answer

A)   Laffer's law.
B)   Okun's law.
C)   stagflation.
D)   the Phillips Curve.E) B) and D)
F) C) and D)

Question 5

Critics of supply-side economics:

Accepted Answer

A)   argue that a tax cut will increase aggregate supply by more than it increases aggregate demand.
B)   contend that the relationship between tax rates and economic incentives is small and of uncertain direction.
C)   believe that a decline in tax rates will increase tax revenues.
D)   point out that tax cuts enable households to substitute work for leisure.E) All of the above
F) A) and B) B

Question 6

Suppose that the Consumer Price Index for a particular economy rose from 110 to 120 in year 1,120 to 130 in year 2,and 130 to 140 in year 3.We could conclude that this economy is experiencing:

Accepted Answer

A)   accelerating inflation.
B)   deflation.
C)   disinflation.
D)   a constant rate of inflation.E) B) and D)
F) B) and C)

Question 7

Stagflation refers to:

Accepted Answer

A)   an increase in inflation accompanied by decreases in real output and employment.
B)   a decline in the price level accompanied by increases in real output and employment.
C)   a simultaneous increase in real output and the price level.
D)   a simultaneous reduction in real output and the price level.E) A) and B)
F) A) and C)

Question 8

A shift in the Phillips Curve to the left will improve the short-run inflation-unemployment choices available to society.

Accepted Answer

A) True 
 B)False

Question 9

In the extended analysis of aggregate supply,the short-run aggregate supply curve is:

Accepted Answer

A)   vertical and the long-run aggregate supply curve is horizontal.
B)   horizontal and the long-run aggregate supply curve is vertical.
C)   upsloping and the long-run aggregate supply curve is vertical.
D)   horizontal and the long-run aggregate supply curve is upsloping.E) A) and D)
F) A) and C)

Question 10

As distinct from reductions in the price level,reductions in the rate of inflation are referred to as:

Accepted Answer

A)   dollar depreciation.
B)   stagflation.
C)   deflation.
D)   disinflation.E) B) and C)
F) A) and B)

Question 11

Which of the following statements is true?

Accepted Answer

A)   The short-run aggregate supply curve is downsloping.
B)   The short-run aggregate supply curve is vertical.
C)   The long-run aggregate supply curve is vertical.
D)   The long-run aggregate supply curve is upsloping.E) A) and C)
F) A) and B)

Question 12

Other things equal,a decrease in the price level will:

Accepted Answer

A)   shift the aggregate supply curve to the left.
B)   shift the aggregate demand curve to the left.
C)   cause a movement up a short-run aggregate supply curve.
D)   cause a movement down an aggregate supply curve.E) None of the above
F) A) and D)

Question 13

Which of the following is a true statement?

Accepted Answer

A)   There is a long-run trade-off between inflation and unemployment.
B)   There is no trade-off between inflation and unemployment in the short-run.
C)   The short-run Phillips Curve is horizontal.
D)   The long-run Phillips Curve is vertical.E) None of the above
F) All of the above D

Question 14

Suppose the full employment level of real output (Q) for a hypothetical economy is $500,the price level (P) initially is 100,and prices and wages are flexible both upward and downward.Use the following short-run aggregate supply schedules to answer the question.  Refer to the information given.If the price level unexpectedly increases from 100 to 125,the level of real output in the short run will:

Accepted Answer

A)   rise from $500 to $560.
B)   fall from $500 to $440.
C)   fall from $560 to $500.
D)   rise from $440 to $500.E) A) and C)
F) C) and D)

Question 15

Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by:

Accepted Answer

A)   adverse shocks to aggregate supply.
B)   adverse shocks to aggregate demand.
C)   an increase in the misery index.
D)   the Vietnam War.E) A) and D)
F) A) and C)

Question 16

In terms of aggregate supply,the short run is a period in which:

Accepted Answer

A)   the price level is constant.
B)   employment is constant.
C)   real output is constant.
D)   nominal wages and other resource prices are unresponsive to price-level changes.E) None of the above
F) A) and C)

Question 17

The Laffer Curve underlies the contention that lower tax rates need not reduce tax revenues.

Accepted Answer

A) True 
 B)False

Question 18

According to the research of Christina Romer and David Romer,tax increases implemented to reduce an inherited budget deficit:

Accepted Answer

A)   reduce real output by the same amount as any other tax increase.
B)   reduce real output by more than other tax increases.
C)   reduce real output by less than other tax increases.
D)   increase real output,contrary to what occurs with other tax increases.E) B) and D)
F) C) and D) C

Question 19

In the extended AD-AS model,the long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 20

A rightward and upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Accepted Answer

A) True 
 B)False

Exam 37: Extending the Analysis of Aggregate Supply

Which of the following allegedly contributed to the stagflation in the mid-1970s?

Correct Answer
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Correct Answer
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In the absence of unexpected shocks,the economy will tend to experience:

Correct Answer
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Inflation accompanied by falling real output and employment is known as:

Correct Answer
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Critics of supply-side economics:

Correct Answer
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B

Suppose that the Consumer Price Index for a particular economy rose from 110 to 120 in year 1,120 to 130 in year 2,and 130 to 140 in year 3.We could conclude that this economy is experiencing:

Correct Answer
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Stagflation refers to:

Correct Answer
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A shift in the Phillips Curve to the left will improve the short-run inflation-unemployment choices available to society.

Correct Answer
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In the extended analysis of aggregate supply,the short-run aggregate supply curve is:

Correct Answer
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As distinct from reductions in the price level,reductions in the rate of inflation are referred to as:

Correct Answer
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Which of the following statements is true?

Correct Answer
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Other things equal,a decrease in the price level will:

Correct Answer
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Which of the following is a true statement?

Correct Answer
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D

Correct Answer
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Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by:

Correct Answer
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In terms of aggregate supply,the short run is a period in which:

Correct Answer
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The Laffer Curve underlies the contention that lower tax rates need not reduce tax revenues.

Correct Answer
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According to the research of Christina Romer and David Romer,tax increases implemented to reduce an inherited budget deficit:

Correct Answer
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C

In the extended AD-AS model,the long-run aggregate supply curve is vertical.

Correct Answer
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A rightward and upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Correct Answer
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Exam 37: Extending the Analysis of Aggregate Supply

Which of the following allegedly contributed to the stagflation in the mid-1970s?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the absence of unexpected shocks,the economy will tend to experience:

Correct AnswerverifiedShow Answer

Inflation accompanied by falling real output and employment is known as:

Correct AnswerverifiedShow Answer

Critics of supply-side economics:

Correct AnswerverifiedB

Suppose that the Consumer Price Index for a particular economy rose from 110 to 120 in year 1,120 to 130 in year 2,and 130 to 140 in year 3.We could conclude that this economy is experiencing:

Correct AnswerverifiedShow Answer

Stagflation refers to:

Correct AnswerverifiedShow Answer

A shift in the Phillips Curve to the left will improve the short-run inflation-unemployment choices available to society.

Correct AnswerverifiedShow Answer

In the extended analysis of aggregate supply,the short-run aggregate supply curve is:

Correct AnswerverifiedShow Answer

As distinct from reductions in the price level,reductions in the rate of inflation are referred to as:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Other things equal,a decrease in the price level will:

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedD

Correct AnswerverifiedShow Answer

Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by:

Correct AnswerverifiedShow Answer

In terms of aggregate supply,the short run is a period in which:

Correct AnswerverifiedShow Answer

The Laffer Curve underlies the contention that lower tax rates need not reduce tax revenues.

Correct AnswerverifiedShow Answer

According to the research of Christina Romer and David Romer,tax increases implemented to reduce an inherited budget deficit:

Correct AnswerverifiedC

In the extended AD-AS model,the long-run aggregate supply curve is vertical.

Correct AnswerverifiedShow Answer

A rightward and upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Correct AnswerverifiedShow Answer

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B

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D

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C

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