Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Figure 10-1
 
-If the price level in Figure 10-1 were 120,

Accepted Answer

A)  there would be excess goods on the market.
B)  firms would have to raise their prices.
C)  inventories would be disappearing.
D)  aggregate quantity demanded would exceed aggregate quantity supplied.E) A) and C)
F) A) and B)

Question 4

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

The aggregate supply curve is

Accepted Answer

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.E) A) and C)
F) A) and B)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The major cost of production in the economy is

Accepted Answer

A)  interest expense.
B)  capital costs.
C)  rents.
D)  profits.
E)  wages.F) None of the above
G) All of the above

Question 10

If the MPC of an economy is .90 and the economy has a horizontal aggregate supply curve, then an increase in investment spending of $50 million will increase total income by

Accepted Answer

A)  $50 million.
B)  more than $50 million but less than $500 million.
C)  $500 million.
D)  more than $500 million.E) B) and D)
F) A) and C)

Question 11

When inflation occurs, net exports will

Accepted Answer

A)  increase as imports decrease.
B)  increase as exports increase.
C)  decrease as imports decrease.
D)  decrease as imports increase.E) A) and C)
F) A) and B)

Question 12

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) A) and B)
F) C) and D)

Question 13

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

Accepted Answer

A)  demand curve to shift outward.
B)  supply curve to shift outward.
C)  supply curve to shift inward.
D)  demand curve to become flatter.E) B) and C)
F) A) and B)

Question 14

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

Accepted Answer

A)  deflation 
B)  reflation 
C)  stagflation 
D)  disinflationE) All of the above
F) A) and C)

Question 15

Figure 10-1
 
-In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Accepted Answer

A)  $6,000 billion real GDP and price level of 110 
B)  $5,000 billion real GDP and price level of 120 
C)  $5,000 billion real GDP and price level of 110 
D)  $7,500 billion real GDP and price level of 100E) A) and D)
F) A) and C)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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) None of the above
F) A) and B)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The combination of high unemployment and high inflation is termed

Accepted Answer

A)  reflation.
B)  stagflation.
C)  depression.
D)  unflation.E) None of the above
F) A) and C)

Exam 27: Bringing in the Supply Side: Unemployment and Inflation

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

Correct AnswerverifiedShow Answer

The aggregate supply curve is

Correct AnswerverifiedShow Answer

When inflation occurs, net exports will

Correct AnswerverifiedShow Answer

The combination of high unemployment and high inflation is termed

Correct AnswerverifiedShow Answer

The major cost of production in the economy is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the MPC of an economy is .90 and the economy has a horizontal aggregate supply curve, then an increase in investment spending of $50 million will increase total income by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

Correct AnswerverifiedShow Answer

Figure 10-1 -In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

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Figure 10-1 -If the price level in Figure 10-1 were 120,

Correct AnswerverifiedShow Answer

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

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

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

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

Equilibrium GDP in excess of potential GDP eventually will cause the aggregate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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