Question 1

2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as A)  a move from b to c on A  \mathrm { AS } _ { 2 }  B)  a move from b to f to d. C)  a change of aggregate supply from A  \mathrm { AS } _ { 2 } 	ext { to } \mathrm { AS } _ { 1 }  D)  a move from b to d. " class="answers-bank-image d-inline" rel="preload" >
Refer to the diagram. Assume that nominal wages initially are set based on the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as

Accepted Answer

A)   a move from b to c on A  AS2\mathrm { AS } _ { 2 }AS2​ 
B)   a move from b to f to d.
C)   a change of aggregate supply from A  AS2 to AS1\mathrm { AS } _ { 2 } 	ext { to } \mathrm { AS } _ { 1 }AS2​ to AS1​ 
D)   a move from b to d. E) A) and D)
F) None of the above

Question 2

Stagﬂation can be described as a

Accepted Answer

A)   shift right in the aggregate supply curve.
B)   shift left in the aggregate supply curve.
C)   period of stable prices and high unemployment.
D)   period of rising prices and low unemployment.E) None of the above
F) All of the above

Question 3

If the government adopts a hands-off policy toward inﬂation, then the long run effects of cost-push
inﬂation and demand-pull inﬂation are identical.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

Accepted Answer

A)   Laffer Curve.
B)   Phillips Curve.
C)   labor demand curve.
D)   production possibilities curve.E) C) and D)
F) None of the above

Question 5

In the long run, demand-pull inﬂation

Accepted Answer

A)   starts out with a shift in the AS curve but no shift of the AD curve.
B)   starts out with a rightward shift in the AD curve, followed by a resulting leftward shift of the short-run AS curve.
C)   starts out with a leftward shift in the AD curve, followed by a resulting rightward shift of the short-run AS curve.
D)   involves a shift of the AD curve only, with no shift of the AS curve.E) C) and D)
F) A) and B)

Question 6

In the short run, demand-pull inﬂation increases

Accepted Answer

A)   real wages, but in the long run only nominal wages.
B)   nominal wages, but in the long run only real wages.
C)   real output and the price level, but in the long run only real output.
D)   real output and the price level, but in the long run only the price level.E) A) and B)
F) B) and D)

Question 7

The experience of the United States with supply-side policies is that tax cuts affect the economy
more on the demand side rather than the supply side.

Accepted Answer

A) True 
 B)False

Question 8

Accepted Answer

A)   increase real output from  Qf to Q2Q _ { f } 	ext { to } Q _ { 2 }Qf​ to Q2​ 
B)   change aggregate supply from A  AS2 to AS1\mathrm { AS } _ { 2 } 	ext { to } \mathrm { AS } _ { 1 }AS2​ to AS1​ 
C)   decrease real output from  Q2 to Q1Q _ { 2 } 	ext { to } Q _ { 1 }Q2​ to Q1​ 
D)   move the economy from b to d. E) None of the above
F) A) and D)

Question 9

Disinﬂation occurs when

Accepted Answer

A)   the price level is falling.
B)   investment plans exceed saving.
C)   a speculative investment "bubble" is bursting.
D)   the inﬂation rate is declining.E) C) and D)
F) None of the above

Question 10

Average Tax Rate  Tax Revenue ($B) 20%$250403006025080200\begin{array} { | c | c | } \hline 	ext { Average Tax Rate } & 	ext { Tax Revenue } ( \$ B )  \\hline 20 \% & \$ 250 \\hline 40 & 300 \\hline 60 & 250 \\hline 80 & 200 \\hline\end{array} Average Tax Rate 20%406080​ Tax Revenue ($B) $250300250200​​  If graphed, the relationship shown would depict this economy's

Accepted Answer

A)   Laffer Curve.
B)   Lorenz Curve.
C)   Tax Freedom Curve.
D)   Phillips Curve. E) C) and D)
F) A) and B)

Question 11

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Accepted Answer

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

Question 12

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth
Or to reduce an inherited budget deﬁcit tend to result in

Accepted Answer

A)   a strong positive relationship between taxes and output GDP.
B)   a weak positive relationship between taxes and output GDP.
C)   an uncertain correlation between taxes and output GDP.
D)   a strong negative relationship between taxes and output GDP.E) A) and B)
F) A) and C)

Question 13

Accepted Answer

A)   inﬂation below the natural rate.
B)   inﬂation above the natural rate.
C)   unemployment above the natural rate.
D)   unemployment below the natural rate.E) None of the above
F) A) and B)

Question 14

In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Accepted Answer

A)   movement up and to the left along a stable Phillips curve.
B)   movement down and to the right along a stable Phillips curve.
C)   Phillips curve shifting to the right.
D)   Phillips curve shifting to the left.E) A) and C)
F) B) and C)

Question 15

Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

Accepted Answer

A)   rise temporarily. However, consequent decreases in nominal wages will eventually bring the actual and expected rates of inﬂation into balance.
B)   rise temporarily. However, consequent increases in nominal wages will eventually bring the actual and expected rates of inﬂation into balance.
C)   fall temporarily. However, consequent increases in nominal wages will eventually bring the actual and expected rates of inﬂation into balance.
D)   fall temporarily. However, consequent decreases in nominal wages will eventually bring the actual and expected rates of inﬂation into balance.E) A) and D)
F) A) and B)

Question 16

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

Accepted Answer

A)   Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting more unemployment to reduce the rate of inﬂation.
B)   Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting a higher rate of inﬂation to reduce unemployment.
C)   Policymakers have instituted an expansionary monetary policy and/or a budgetary deﬁcit, thereby accepting a higher rate of inﬂation to reduce unemployment.
D)   Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting more unemployment to reduce the rate of inﬂation.E) All of the above
F) B) and C)

Question 17

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6
Percent. What is the misery index for this nation?

Accepted Answer

A)   15 percent
B)   31 percent
C)   34 percent
D)   53 percentE) A) and C)
F) B) and C)

Question 18

Refer to the graphs. Assume that the economy is initially at equilibrium where AD  AD2A D _ { 2 }AD2​  and AS intersect
In Graph 1, and also assume that the economy is initially at point C in Graph 2. A movement from
Point C to point B in graph 2 would most likely be associated, in graph 1, with a shift of

Accepted Answer

A)   AD to the right.
B)   AD to the left.
C)   AS to the right.
D)   AS to the left. E) C) and D)
F) A) and D)

Question 19

Accepted Answer

A)   leftward shift of the aggregate supply curve from A  AS1 to AS2\mathrm { AS } _ { 1 } 	ext { to } \mathrm { AS } _ { 2 }AS1​ to AS2​ 
B)   rightward shift of the aggregate demand curve from AD  AD1 to AD2A D _ { 1 } 	ext { to } A D _ { 2 }AD1​ to AD2​ 
C)   move from d to b to a.
D)   move from d directly to a. E) A) and D)
F) B) and C)

Question 20

Accepted Answer

A)   real output will rise above  Qf.Q _ { f }.Qf​. 
B)   the price level will rise from  P1 to P2P _ { 1 } 	ext { to } P _ { 2 }P1​ to P2​ 
C)   it is possible that aggregate supply will shift rightward from A  AS2\mathrm { AS } _ { 2 }AS2​  because nominal wageDemands will rise.
D)   the price level will rise from  P2 to P3P _ { 2 } 	ext { to } P _ { 3 }P2​ to P3​E) None of the above
F) A) and C)

Exam 18: Extending the Analysis of Aggregate Supply

$\begin{array} { | c | c | } \hline \text { Average Tax Rate } & \text { Tax Revenue } ( \$ B ) \\\hline 20 \% & \$ 250 \\\hline 40 & 300 \\\hline 60 & 250 \\\hline 80 & 200 \\\hline\end{array}$ If graphed, the relationship shown would depict this economy's

Correct Answer
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$A) increase real output from Q _ { f } \text { to } Q _ { 2 } B) change aggregate supply from A \mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 } C) decrease real output from Q _ { 2 } \text { to } Q _ { 1 } D) move the economy from b to d.$

Correct Answer
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Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

Correct Answer
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Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

Correct Answer
verified

Correct Answer
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Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6 Percent. What is the misery index for this nation?

Correct Answer
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The experience of the United States with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Correct Answer
verified

Correct Answer
verified

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth Or to reduce an inherited budget deﬁcit tend to result in

Correct Answer
verified

Disinﬂation occurs when

Correct Answer
verified

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Correct Answer
verified

If the government adopts a hands-off policy toward inﬂation, then the long run effects of cost-push inﬂation and demand-pull inﬂation are identical.

Correct Answer
verified

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

Correct Answer
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In the long run, demand-pull inﬂation

Correct Answer
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In the short run, demand-pull inﬂation increases

Correct Answer
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Correct Answer
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$A) leftward shift of the aggregate supply curve from A \mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 } B) rightward shift of the aggregate demand curve from AD A D _ { 1 } \text { to } A D _ { 2 } C) move from d to b to a. D) move from d directly to a.$

Correct Answer
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Correct Answer
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In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Correct Answer
verified

Stagﬂation can be described as a

Correct Answer
verified

Exam 18: Extending the Analysis of Aggregate Supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the diagram for a speciﬁc economy. The curve on this graph is known as a

Correct AnswerverifiedShow Answer

Disinﬂation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inﬂation is initially less than the expected rate, causing the unemployment rate to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inﬂation rate: 6 Percent. What is the misery index for this nation?

Correct AnswerverifiedShow Answer

The experience of the United States with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Romer and Romer paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," found that tax changes that are made to promote long-run growth Or to reduce an inherited budget deﬁcit tend to result in

Correct AnswerverifiedShow Answer

Disinﬂation occurs when

Correct AnswerverifiedShow Answer

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If AD increases, then the long-run equilibrium point will be at point

Correct AnswerverifiedShow Answer

If the government adopts a hands-off policy toward inﬂation, then the long run effects of cost-push inﬂation and demand-pull inﬂation are identical.

Correct AnswerverifiedShow Answer

Refer to the diagram for a speciﬁc economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?

Correct AnswerverifiedShow Answer

In the long run, demand-pull inﬂation

Correct AnswerverifiedShow Answer

In the short run, demand-pull inﬂation increases

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the diagram. Assume that nominal wages initially are set based on the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as

Correct AnswerverifiedShow Answer

In the period 2011 through 2018, as the economy slowly mended, the economy experienced an ongoing pattern of falling inﬂation coinciding with falling unemployment. This suggests a

Correct AnswerverifiedShow Answer

Stagﬂation can be described as a

Correct AnswerverifiedShow Answer

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