Question 1

Aggregate supply shocks will:

Accepted Answer

A)   move the economy along the Phillips Curve toward less unemployment.
B)   move the economy along the Phillips Curve toward less inflation.
C)   shift the Phillips Curve to the left.
D)   shift the Phillips Curve to the right.E) All of the above
F) A) and B)

Question 2

Supply-side economists criticize non supply-side economists for:

Accepted Answer

A)   not recognizing the possibility of cost-push inflation.
B)   focusing macroeconomic policy mainly on aggregate demand.
C)   assuming that households and businesses form rational expectations about complex economic matters.
D)   neglecting to note the severe impacts of budget deficits on investment spending.E) A) and B)
F) None of the above

Question 3

Many economists accept the idea of a short-run tradeoff between the unemployment and inflation rates, but they do not think that there is such a tradeoff in the long run.

Accepted Answer

A) True 
 B)False

Question 4

In the short run, demand-pull inflation will drive up the price level and increase real output; in the long run, only the price level will rise.

Accepted Answer

A) True 
 B)False

Question 5

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 GDP is constant.
D)   nominal wages and other input prices are constant.E) A) and D)
F) A) and B)

Question 6

Refer to the graph below. The economy is initially at equilibrium when AD1 and AS1 intersect. If there is cost-push inflation in the economy so that aggregate supply shifts from AS1 to AS2, then to reduce unemployment the government may increase aggregate demand which in the short run shifts: 1 and AS1 intersect. If there is cost-push inflation in the economy so that aggregate supply shifts from AS1 to AS2, then to reduce unemployment the government may increase aggregate demand which in the short run shifts:   A)  AD1 to AD2, increases the price level from P1 to P2, and increases real domestic output from Q1 to Q2. B)  AD1 to AD2, increases the price level from P2 to P3, and increases real domestic output from Q1 to Q2. C)  AD1 to AD2, increases the price level from P2 to P3, and increases real domestic output from Q2 to Q1. D)  AD2 to AD1, decreases the price level from P3 to P2, and decreases real domestic output from Q1 to Q2." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   AD1 to AD2, increases the price level from P1 to P2, and increases real domestic output from Q1 to Q2.
B)   AD1 to AD2, increases the price level from P2 to P3, and increases real domestic output from Q1 to Q2.
C)   AD1 to AD2, increases the price level from P2 to P3, and increases real domestic output from Q2 to Q1.
D)   AD2 to AD1, decreases the price level from P3 to P2, and decreases real domestic output from Q1 to Q2.E) None of the above
F) All of the above

Question 7

Refer to the diagram below. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. Assuming no change in aggregate demand, the long-run response to a recession caused by cost-push inflation is best depicted as a: 1 and the initial aggregate supply curve is AS1. Assuming no change in aggregate demand, the long-run response to a recession caused by cost-push inflation is best depicted as a:   A)  move from a to d along the long-run aggregate supply curve. B)  rightward shift of the aggregate supply curve from AS2 to AS1. C)  move from a to c to d. D)  leftward shift of the aggregate supply curve from AS1 to AS2." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   move from a to d along the long-run aggregate supply curve.
B)   rightward shift of the aggregate supply curve from AS2 to AS1.
C)   move from a to c to d.
D)   leftward shift of the aggregate supply curve from AS1 to AS2.E) None of the above
F) A) and B)

Question 8

-Refer to the above graph. The full-employment unemployment rate in this economy would be:

Accepted Answer

A)   5 percent.
B)   6 percent.
C)   7 percent.
D)   5-6 percent.E) A) and D)
F) All of the above

Question 9

1 represents a rate of: A)  inflation below the natural rate. B)  inflation above the natural rate. C)  unemployment above the natural rate. D)  unemployment below the natural rate." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. Point b on short-run Phillips Curve PC1 represents a rate of:

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

Question 10

In the long-run, the attempt to correct slow economic growth or the unemployment caused by cost-push inflation by implementing an expansionary fiscal policy will most likely produce:

Accepted Answer

A)   disinflation.
B)   a recession.
C)   a price level surprise.
D)   inflationE) B) and C)
F) A) and C)

Question 11

An increase in inflation is likely to occur when government:

Accepted Answer

A)   counters cost-push inflation with a stimulative fiscal policy or monetary policy.
B)   adopts a hands-off approach to cost-push inflation.
C)   increases aggregate supply by lowering nominal wages.
D)   increases aggregate demand by raising nominal wages.E) B) and D)
F) B) and C)

Question 12

Economic growth driven by supply factors causes:

Accepted Answer

A)   continuous leftward shifts of aggregate supply.
B)   a rightward shift of an economy's long-run aggregate supply.
C)   one time shift in aggregate supply.
D)   no shift in aggregate supply.E) A) and D)
F) A) and B)

Question 13

The Phillips Curve is based on the idea that with a constant short-run aggregate supply curve, a greater increase in aggregate demand is associated with a:

Accepted Answer

A)   smaller increase in price level.
B)   smaller increase in nominal wage rates.
C)   greater increase in the unemployment rate.
D)   greater increase in the rate of inflation.E) All of the above
F) C) and D)

Question 14

-Refer to the above diagram for a specific economy. Stagflation will:

Accepted Answer

A)   shift this curve outward.
B)   shift this curve inward.
C)   move this economy southeast along the curve.
D)   move this economy northwest along the curve.E) A) and D)
F) None of the above

Question 15

1. Which of the following movements is consistent with The Phillips Curve? A)  the movement from B1 to B2 B)  the movement from B1 to C1 C)  the movement from C1 to B2 D)  the movement from B2 to B1" class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram and assume the economy is initially at point b1. Which of the following movements is consistent with The Phillips Curve?

Accepted Answer

A)   the movement from B1 to B2
B)   the movement from B1 to C1
C)   the movement from C1 to B2
D)   the movement from B2 to B1E) B) and D)
F) A) and D)

Question 16

An "adverse aggregate supply shock" could result from:

Accepted Answer

A)   a sharp rise in productivity.
B)   a rapid rise in oil prices.
C)   a decline in wages.
D)   an appreciation of the dollar.E) All of the above
F) A) and C)

Question 17

1. According to the adaptive expectations theorists, the long-run relationship between the unemployment rate and the rate of inflation is represented by: A)  the line connecting B1 and C1. B)  the line through B1, B2, B3, and B4. C)  the line connecting C1 and B2. D)  any line parallel to the horizontal axis." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram and assume the economy is initially at point b1. According to the adaptive expectations theorists, the long-run relationship between the unemployment rate and the rate of inflation is represented by:

Accepted Answer

A)   the line connecting B1 and C1.
B)   the line through B1, B2, B3, and B4.
C)   the line connecting C1 and B2.
D)   any line parallel to the horizontal axis.E) B) and C)
F) None of the above

Question 18

The long-run Phillips Curve is vertical at:

Accepted Answer

A)   price level.
B)   the natural rate of unemployment.
C)   every level of real GDP.
D)   the rate of maximum taxation.E) B) and C)
F) B) and D)

Question 19

"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) All of the above
F) A) and B)

Question 20

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

Accepted Answer

A)   shift the short run 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 a short run aggregate supply curve.E) A) and D)
F) None of the above

Exam 15: Long-Run Macroeconomic Adjustments

-Refer to the above diagram and assume the economy is initially at point b₁. According to the adaptive expectations theorists, the long-run relationship between the unemployment rate and the rate of inflation is represented by:

Correct Answer
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Correct Answer
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-Refer to the above diagram. Point b on short-run Phillips Curve PC₁ represents a rate of:

Correct Answer
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-Refer to the above graph. The full-employment unemployment rate in this economy would be:

Correct Answer
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The long-run Phillips Curve is vertical at:

Correct Answer
verified

In the long-run, the attempt to correct slow economic growth or the unemployment caused by cost-push inflation by implementing an expansionary fiscal policy will most likely produce:

Correct Answer
verified

The Phillips Curve is based on the idea that with a constant short-run aggregate supply curve, a greater increase in aggregate demand is associated with a:

Correct Answer
verified

Economic growth driven by supply factors causes:

Correct Answer
verified

Aggregate supply shocks will:

Correct Answer
verified

Refer to the diagram below. The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁. Assuming no change in aggregate demand, the long-run response to a recession caused by cost-push inflation is best depicted as a:

Correct Answer
verified

-Refer to the above diagram for a specific economy. Stagflation will:

Correct Answer
verified

Supply-side economists criticize non supply-side economists for:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

In the short run, demand-pull inflation will drive up the price level and increase real output; in the long run, only the price level will rise.

Correct Answer
verified

Many economists accept the idea of a short-run tradeoff between the unemployment and inflation rates, but they do not think that there is such a tradeoff in the long run.

Correct Answer
verified

"Stagflation" refers to:

Correct Answer
verified

An increase in inflation is likely to occur when government:

Correct Answer
verified

-Refer to the above diagram and assume the economy is initially at point b₁. Which of the following movements is consistent with The Phillips Curve?

Correct Answer
verified

An "adverse aggregate supply shock" could result from:

Correct Answer
verified

Exam 15: Long-Run Macroeconomic Adjustments

-Refer to the above diagram and assume the economy is initially at point b1. According to the adaptive expectations theorists, the long-run relationship between the unemployment rate and the rate of inflation is represented by:

Correct AnswerverifiedShow Answer

Refer to the graph below. The economy is initially at equilibrium when AD1 and AS1 intersect. If there is cost-push inflation in the economy so that aggregate supply shifts from AS1 to AS2, then to reduce unemployment the government may increase aggregate demand which in the short run shifts:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. Point b on short-run Phillips Curve PC1 represents a rate of:

Correct AnswerverifiedShow Answer

-Refer to the above graph. The full-employment unemployment rate in this economy would be:

Correct AnswerverifiedShow Answer

The long-run Phillips Curve is vertical at:

Correct AnswerverifiedShow Answer

In the long-run, the attempt to correct slow economic growth or the unemployment caused by cost-push inflation by implementing an expansionary fiscal policy will most likely produce:

Correct AnswerverifiedShow Answer

The Phillips Curve is based on the idea that with a constant short-run aggregate supply curve, a greater increase in aggregate demand is associated with a:

Correct AnswerverifiedShow Answer

Economic growth driven by supply factors causes:

Correct AnswerverifiedShow Answer

Aggregate supply shocks will:

Correct AnswerverifiedShow Answer

Refer to the diagram below. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. Assuming no change in aggregate demand, the long-run response to a recession caused by cost-push inflation is best depicted as a:

Correct AnswerverifiedShow Answer

-Refer to the above diagram for a specific economy. Stagflation will:

Correct AnswerverifiedShow Answer

Supply-side economists criticize non supply-side economists for:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run, demand-pull inflation will drive up the price level and increase real output; in the long run, only the price level will rise.

Correct AnswerverifiedShow Answer

Many economists accept the idea of a short-run tradeoff between the unemployment and inflation rates, but they do not think that there is such a tradeoff in the long run.

Correct AnswerverifiedShow Answer

"Stagflation" refers to:

Correct AnswerverifiedShow Answer

An increase in inflation is likely to occur when government:

Correct AnswerverifiedShow Answer

-Refer to the above diagram and assume the economy is initially at point b1. Which of the following movements is consistent with The Phillips Curve?

Correct AnswerverifiedShow Answer

An "adverse aggregate supply shock" could result from:

Correct AnswerverifiedShow Answer

-Refer to the above diagram and assume the economy is initially at point b₁. According to the adaptive expectations theorists, the long-run relationship between the unemployment rate and the rate of inflation is represented by:

Correct Answer
verified

Correct Answer
verified

-Refer to the above diagram. Point b on short-run Phillips Curve PC₁ represents a rate of:

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Refer to the diagram below. The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁. Assuming no change in aggregate demand, the long-run response to a recession caused by cost-push inflation is best depicted as a:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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-Refer to the above diagram and assume the economy is initially at point b₁. Which of the following movements is consistent with The Phillips Curve?

Correct Answer
verified

Correct Answer
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