Question 1

The concept of aggregate supply refers to a

Accepted Answer

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

Question 2

Figure 10-5

In Figure 10-5, which graph best illustrates the situation of an economy near full employment that experiences an increase in autonomous consumer spending?

Accepted Answer

A)   (1) 
B)   (2) 
C)   (3) 
D)   (4)

Question 3

When money wages rise, the most significant effect on the aggregate supply curve is that it

Accepted Answer

A)   shifts outward.
B)   shifts inward.
C)   becomes flatter.
D)   becomes steeper.

Question 4

The typical result of an adverse supply shock is

Accepted Answer

A)   falling output accompanied by accelerating inflation.
B)   falling output accompanied by decelerating inflation.
C)   rising output accompanied by accelerating inflation.
D)   rising output accompanied by decelerating inflation.

Question 5

As the slope of the aggregate supply curve increases, this indicates that

Accepted Answer

A)   the economy is getting close to potential GDP.
B)   the economy is reducing employment.
C)   inflation will be less of a problem.
D)   output is falling.

Question 6

What is the usual response of firm to an increase in the price of what they sell?

Accepted Answer

A)   An increase in output
B)   An increase in hiring factors of production
C)   An increase in the profit level of the firm
D)   An increase in employment at the firm
E)   All of these responses are correct.

Question 7

An inflationary gap will exist when

Accepted Answer

A)   aggregate demand grows more slowly than aggregate supply.
B)   there is downward pressure on prices.
C)   expenditures are not equal to aggregate demand.
D)   equilibrium GDP is greater than full employment GDP.

Question 8

A period of stagflation is the normal aftermath of a period of

Accepted Answer

A)   excess aggregate supply.
B)   deficient aggregate demand.
C)   excess aggregate demand.
D)   high unemployment rates.

Question 9

If aggregate quantity supplied exceeds aggregate quantity demanded, we can expect an unplanned

Accepted Answer

A)   depletion of inventories, causing firms to raise prices.
B)   depletion of inventories, causing firms to lower prices.
C)   accumulation of inventories, causing firms to raise prices.
D)   accumulation of inventories, causing firms to lower prices.

Question 10

According to an old saying, when too much money is chasing too few goods, we have a(n)

Accepted Answer

A)   recessionary gap.
B)   inflationary gap.
C)   full employment.
D)   paradox of thrift.

Question 11

The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Accepted Answer

A)   absorbed by price changes.
B)   saved rather than spent.
C)   matched by changes in supply.
D)   matched by changes in income.

Question 12

If the price level decreases, what will happen to the level of real GDP supplied?

Accepted Answer

A)   It will usually decrease.
B)   It will usually increase.
C)   Nothing.
D)   It will decrease at first and then increase.

Question 13

The only factor that can cause movement along the aggregate supply curve is the

Accepted Answer

A)   labor force.
B)   capital stock.
C)   availability of resources.
D)   price level.
E)   All of these responses are correct.

Question 14

Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

Accepted Answer

A)   deflationary gap.
B)   recessionary gap.
C)   inflationary gap.
D)   reflationary gap.

Question 15

An equilibrium point beyond a potential GDP is termed as

Accepted Answer

A)   deflationary gap.
B)   recessionary gap.
C)   inflationary gap.
D)   acceleration gap.

Question 16

One complication in the process of reducing inflation by creating recessions is that the price level

Accepted Answer

A)   adjusts more quickly to recessionary gaps than to inflationary gaps.
B)   does not apply as it does in inflationary gaps.
C)   always rises.
D)   rarely falls.

Question 17

The existence of an inflationary gap should cause

Accepted Answer

A)   wages to fall.
B)   prices to fall.
C)   unemployment to rise.
D)   net exports to rise.

Question 18

College graduates looking for jobs were less fortunate in 2010 than graduates in 2018.

Accepted Answer

A) True 
 B)False

Question 19

The aggregate supply curve slopes upward because firms

Accepted Answer

A)   seek to maximize profits and output.
B)   normally can purchase inputs at fixed prices.
C)   employ technology, which is always fixed.
D)   purchase inputs whose prices rise as output rises.

Question 20

How are aggregate supply and stagflation related?

Accepted Answer

A)   Stagflation usually causes an adverse shift in aggregate supply.
B)   An adverse supply shift usually causes stagflation.
C)   Stagflation only follows inflation, with no relation to aggregate supply.
D)   There is no relationship between the two.

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

The aggregate supply curve slopes upward because firms

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Many economists describe the 2007-2009 period in the United States as being a condition of a(n)

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How are aggregate supply and stagflation related?

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The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Correct AnswerverifiedShow Answer

If the price level decreases, what will happen to the level of real GDP supplied?

Correct AnswerverifiedShow Answer

An inflationary gap will exist when

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An equilibrium point beyond a potential GDP is termed as

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One complication in the process of reducing inflation by creating recessions is that the price level

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What is the usual response of firm to an increase in the price of what they sell?

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The typical result of an adverse supply shock is

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The only factor that can cause movement along the aggregate supply curve is the

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According to an old saying, when too much money is chasing too few goods, we have a(n)

Correct AnswerverifiedShow Answer

The concept of aggregate supply refers to a

Correct AnswerverifiedShow Answer

If aggregate quantity supplied exceeds aggregate quantity demanded, we can expect an unplanned

Correct AnswerverifiedShow Answer

A period of stagflation is the normal aftermath of a period of

Correct AnswerverifiedShow Answer

Figure 10-5 In Figure 10-5, which graph best illustrates the situation of an economy near full employment that experiences an increase in autonomous consumer spending?

Correct AnswerverifiedShow Answer

As the slope of the aggregate supply curve increases, this indicates that

Correct AnswerverifiedShow Answer

The existence of an inflationary gap should cause

Correct AnswerverifiedShow Answer

When money wages rise, the most significant effect on the aggregate supply curve is that it

Correct AnswerverifiedShow Answer

College graduates looking for jobs were less fortunate in 2010 than graduates in 2018.

Correct AnswerverifiedShow Answer

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