Question 1

The economy does have a self-correcting mechanism that tends to eliminate either unemployment or inflation and tends to act slowly and unevenly.

Accepted Answer

A) True 
 B)False

Question 2

How is it possible for the economy to have a recessionary gap?

Accepted Answer

A)  Equilibrium is at a GDP level below full employment.
B)  Equilibrium is at a GDP level equal to full employment.
C)  Equilibrium is at a GDP level above full employment.
D)  GDP is rising at full employment.
E)  GDP is falling at full employment.F) C) and E)
G) C) and D)

Question 3

What causes the aggregate supply curve to have an upward slope in the short run, but a vertical slope in the long run?

Accepted Answer

When there is substantial unemployment i...

Question 4

Figure 10-6
​ 
-In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) E) A) and D)
F) A) and C)

Question 5

Figure 10-8
​ 
-Figure 10-8 describes which of the following periods in the United States?

Accepted Answer

A)  1930s
B)  1973-1975
C)  late 1990s
D)  2007-2009E) A) and D)
F) A) and C)

Question 6

The years 2002 through 2007 can be described as a period of

Accepted Answer

A)  falling output accompanied by increasing inflation.
B)  falling output accompanied by decreasing inflation.
C)  rising output accompanied by increasing inflation.
D)  rising output accompanied by decreasing inflation.E) B) and C)
F) A) and B)

Question 7

One complication that tends to prolong recessionary gaps is that wages

Accepted Answer

A)  are fixed by unions, which represent nearly all workers in the United States.
B)  tend to rise rapidly.
C)  rarely fall.
D)  tend to move in the opposite direction from prices.E) B) and C)
F) None of the above

Question 8

For any given growth rate of aggregate supply, a faster growth rate of aggregate demand will lead to more inflation and faster growth of real output.

Accepted Answer

A) True 
 B)False

Question 9

Quantity supplied of all goods and services at different price levels is known as

Accepted Answer

A)  aggregate supply.
B)  aggregate demand.
C)  productivity.
D)  All of these responses are correct.E) All of the above
F) A) and B)

Question 10

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) All of the above
F) C) and D)

Question 11

Holding wages constant, any increase in productivity will decrease business costs, improve profitability, and encourage more production.

Accepted Answer

A) True 
 B)False

Question 12

In response to the demands of environmentalists, large sections of timberlands are put off limits to logging.What effect will this have on the aggregate supply curve?

Accepted Answer

A)  Shift the curve outward.
B)  Shift the curve inward.
C)  Move the economy up along the curve.
D)  Move the economy down along the curve.E) A) and D)
F) All of the above

Question 13

Which of the following would cause stagflation?

Accepted Answer

A)  Aggregate demand shifts left.
B)  Aggregate demand shifts right.
C)  Aggregate supply shifts left.
D)  Aggregate supply shifts right.E) A) and B)
F) A) and C)

Question 14

In 1986, OPEC countries increased their production of oil.This caused

Accepted Answer

A)  the price level to rise.
B)  aggregate supply to shift right.
C)  unemployment to rise.
D)  All of these responses are correct.E) None of the above
F) All of the above

Question 15

The underlying cause of inflation is

Accepted Answer

A)  labor unions demanding higher wages.
B)  businesses charging higher prices.
C)  government raising taxes.
D)  increasing aggregate demand.E) A) and D)
F) A) and C)

Question 16

The 2002-2008 OPEC price increases caused by conflict in the Middle East caused the aggregate

Accepted Answer

A)  demand curve to shift outward.
B)  demand curve to shift inward.
C)  supply curve to shift outward.
D)  supply curve to shift inward.E) All of the above
F) None of the above

Question 17

As the multiplier process is working on the demand side,

Accepted Answer

A)  firms will meet the additional demand without raising prices.
B)  firms will meet the additional demand only by raising prices.
C)  firms will not meet the additional demand.
D)  the multiplier process will cease creating demand.E) All of the above
F) C) and D)

Question 18

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 19

The price of imported oil decreased in 2001.How did this affect the aggregate supply curve?

Accepted Answer

A)  The aggregate supply curve became steeper.
B)  The aggregate supply curve became flatter.
C)  The aggregate supply curve shifted inward.
D)  The aggregate supply curve shifted outward.E) A) and D)
F) None of the above

Question 20

The aggregate supply curve shows the relationship between the ____ and the ____, holding all other factors constant.

Accepted Answer

A)  price level; quantity of real GDP supplied
B)  price level; supply of nominal GDP
C)  nominal GDP; price level of real GDP
D)  price level; amount of nominal GDP suppliedE) C) and D)
F) B) and D)

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

Quantity supplied of all goods and services at different price levels is known as

Correct AnswerverifiedShow Answer

The aggregate supply curve shows the relationship between the ____ and the ____, holding all other factors constant.

Correct AnswerverifiedShow Answer

Holding wages constant, any increase in productivity will decrease business costs, improve profitability, and encourage more production.

Correct AnswerverifiedShow Answer

Figure 10-8 ​ -Figure 10-8 describes which of the following periods in the United States?

Correct AnswerverifiedShow Answer

As the multiplier process is working on the demand side,

Correct AnswerverifiedShow Answer

For any given growth rate of aggregate supply, a faster growth rate of aggregate demand will lead to more inflation and faster growth of real output.

Correct AnswerverifiedShow Answer

In 1986, OPEC countries increased their production of oil.This caused

Correct AnswerverifiedShow Answer

Figure 10-6 ​ -In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

Correct AnswerverifiedShow Answer

The economy does have a self-correcting mechanism that tends to eliminate either unemployment or inflation and tends to act slowly and unevenly.

Correct AnswerverifiedShow Answer

What causes the aggregate supply curve to have an upward slope in the short run, but a vertical slope in the long run?

Correct AnswerverifiedWhen there is substantial unemployment i...View AnswerShow Answer

In response to the demands of environmentalists, large sections of timberlands are put off limits to logging.What effect will this have on the aggregate supply curve?

Correct AnswerverifiedShow Answer

The years 2002 through 2007 can be described as a period of

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The underlying cause of inflation 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

One complication that tends to prolong recessionary gaps is that wages

Correct AnswerverifiedShow Answer

How is it possible for the economy to have a recessionary gap?

Correct AnswerverifiedShow Answer

The price of imported oil decreased in 2001.How did this affect the aggregate supply curve?

Correct AnswerverifiedShow Answer

The 2002-2008 OPEC price increases caused by conflict in the Middle East caused the aggregate

Correct AnswerverifiedShow Answer

Correct Answer
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The aggregate supply curve shows the relationship between the and the , holding all other factors constant.

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Figure 10-8 -Figure 10-8 describes which of the following periods in the United States?

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Figure 10-6 -In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in 2003?

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Correct Answer
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Correct Answer
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When there is substantial unemployment i...
View Answer

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