Question 1

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

Question 2

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) All of the above

Question 3

Refer to the graph below.The effects of stagflation, in the short run, are best represented by a shift from: 1 to AD2 given a stable AS1curve, an increase in the price level from P1to P2, and a fall in output from Q1 to Q2. B) AD2 to AD1 given a stable AS1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2. C) AS1 to AS2 given a stable AD1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2. D) AS2 to AS1 given a stable AD1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  AD1 to AD2 given a stable AS1curve, an increase in the price level from P1to P2, and a fall in output from Q1 to Q2.
B)  AD2 to AD1 given a stable AS1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2.
C)  AS1 to AS2 given a stable AD1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2.
D)  AS2 to AS1 given a stable AD1 curve, an increase in the price level from P1 to P2, and a fall in output from Q1 to Q2.E) A) and B)
F) A) and C)

Question 4

2, and aggregate demand increases.In the short run, the economy will: A) stay at point B2. B) move to point C2 and in the long run to B3. C) move to point B3 and in the long run to C2. D) move to point B1 and in the long run to B1." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.The economy is at point B2, and aggregate demand increases.In the short run, the economy will:

Accepted Answer

A)  stay at point B2.
B)  move to point C2 and in the long run to B3.
C)  move to point B3 and in the long run to C2.
D)  move to point B1 and in the long run to B1.E) A) and D)
F) A) and B)

Question 5

Demand-pull inflation in the short run increases the price level and:

Accepted Answer

A)  real wages.
B)  real output.
C)  unemployment.
D)  nominal wages.E) A) and B)
F) B) and D)

Question 6

Demand-pull inflation and cost-push inflation are identical concepts because both entail rising nominal wages and rising prices.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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

Question 8

An upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Accepted Answer

A) True 
 B)False

Question 9

Most economists reject the idea of a long-run tradeoff between unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the above diagram.Assume that the natural rate of unemployment is 7.5 percent and that the economy is initially operating at point a where the expected and actual rates of inflation are each 6 percent.If the actual rate of inflation unexpectedly falls from 6 percent to 4 percent, then the unemployment rate will:

Accepted Answer

A)  temporarily fall from 7.5 percent to 4 percent.
B)  permanently fall from 7.5 percent to 4 percent.
C)  temporarily rise from 7.5 percent to 9.5 percent.
D)  permanently rise from 7.5 percent to 9.5 percent.E) B) and C)
F) A) and D)

Question 11

A criticism of the arguments for tax cuts made by supply-side economists is that the:

Accepted Answer

A)  demand-side effects will be stronger than the supply-side effects.
B)  supply-side effects will be stronger than the demand-side effects.
C)  supply-side effects will increase saving and reduce consumption.
D)  demand-side effects will reinforce the supply-side effects, thus creating cost-push inflation.E) All of the above
F) B) and C)

Question 12

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

Question 13

The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment.

Accepted Answer

A) True 
 B)False

Question 14

A basic criticism of supply-side economics is that:

Accepted Answer

A)  empirical research clearly shows that incentives to work and invest vary directly with marginal tax rates.
B)  lower taxes will increase aggregate supply much more than they will increase aggregate demand.
C)  lower taxes will increase aggregate demand much more than they will increase aggregate supply.
D)  higher taxes will reduce incentives to work, invest, and innovate.E) A) and B)
F) B) and D)

Question 15

2 and that the economy initially is operating at its full-employment level of output Qf.In terms of this diagram, the long-run aggregate supply curve: A) is AS2. B) is a vertical line extending from Qf upward through e, b, and d. C) may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3. D) is a horizontal line extending from P2 rightward through f, b, and g." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In terms of this diagram, the long-run aggregate supply curve:

Accepted Answer

A)  is AS2.
B)  is a vertical line extending from Qf upward through e, b, and d.
C)  may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3.
D)  is a horizontal line extending from P2 rightward through f, b, and g.E) C) and D)
F) A) and D)

Question 16

The Phillips Curve suggests a tradeoff between:

Accepted Answer

A)  price level stability and income equality.
B)  the level of unemployment and price level stability.
C)  unemployment and income equality.
D)  economic growth and full employment.E) None of the above
F) A) and D)

Question 17

1 and AS1 and then is hit with both demand-pull and cost-push inflation.If this occurs, then, in the short run: A) AD1 will shift to AD2, AS2 will shift to AS3, the price level will be at P2, and output will be at Q2. B) AS1 will shift to AS3, AD2 will shift to AD1, the price level will be at P3, and output will be at Q3. C) AD1 will shift to AD2, AS1 will shift to AS2, the price level will be at P2, and output will be at Q2. D) AD1 will shift to AD2, AS1 will shift to AS2, the price level will be at P3, and output will be at Q1." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.Assume that the economy is at equilibrium at AD1 and AS1 and then is hit with both demand-pull and cost-push inflation.If this occurs, then, in the short run:

Accepted Answer

A)  AD1 will shift to AD2, AS2 will shift to AS3, the price level will be at P2, and output will be at Q2.
B)  AS1 will shift to AS3, AD2 will shift to AD1, the price level will be at P3, and output will be at Q3.
C)  AD1 will shift to AD2, AS1 will shift to AS2, the price level will be at P2, and output will be at Q2.
D)  AD1 will shift to AD2, AS1 will shift to AS2, the price level will be at P3, and output will be at Q1.E) C) and D)
F) All of the above

Question 18

Which factor contributed to the termination of stagflation in the 1980s?

Accepted Answer

A)  less foreign competition
B)  more government regulation
C)  a reduction in oil prices
D)  a rise in per-unit production costsE) A) and B)
F) None of the above

Question 19

1 and the initial aggregate supply curve is AS1.Demand-pull inflation in the short run is best shown as: A) a shift of the aggregate demand curve from AD1 to AD2. B) a move from d to b to a. C) a move directly from d to a. D) a shift of the aggregate supply curve from AS1 to AS2." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1.Demand-pull inflation in the short run is best shown as:

Accepted Answer

A)  a shift of the aggregate demand curve from AD1 to AD2.
B)  a move from d to b to a.
C)  a move directly from d to a.
D)  a shift of the aggregate supply curve from AS1 to AS2.E) A) and D)
F) B) and D)

Question 20

Which of the following most significantly contributed to the 1970s' and the early 1980s' stagflation in Canada?

Accepted Answer

A)  An appreciation of the Canadian dollar
B)  A sharp drop in the prices of farm products
C)  A dramatic increase in energy prices
D)  Rising productivity in manufacturingE) B) and C)
F) A) and D)

Exam 16: B: Long-Run Macroeconomic Adjustments

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

Correct Answer
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An upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Correct Answer
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Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In terms of this diagram, the long-run aggregate supply curve:

Correct Answer
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The Phillips Curve suggests a tradeoff between:

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

Correct Answer
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Correct Answer
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Which factor contributed to the termination of stagflation in the 1980s?

Correct Answer
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Demand-pull inflation and cost-push inflation are identical concepts because both entail rising nominal wages and rising prices.

Correct Answer
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Which of the following most significantly contributed to the 1970s' and the early 1980s' stagflation in Canada?

Correct Answer
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Refer to the above graph.The economy is at point B₂, and aggregate demand increases.In the short run, the economy will:

Correct Answer
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Refer to the above graph.Assume that the economy is at equilibrium at AD₁ and AS₁ and then is hit with both demand-pull and cost-push inflation.If this occurs, then, in the short run:

Correct Answer
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A criticism of the arguments for tax cuts made by supply-side economists is that the:

Correct Answer
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Most economists reject the idea of a long-run tradeoff between unemployment and inflation.

Correct Answer
verified

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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Refer to the above diagram.The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.Demand-pull inflation in the short run is best shown as:

Correct Answer
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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 graph below.The effects of stagflation, in the short run, are best represented by a shift from:

Correct Answer
verified

The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment.

Correct Answer
verified

A basic criticism of supply-side economics is that:

Correct Answer
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Demand-pull inflation in the short run increases the price level and:

Correct Answer
verified

Exam 16: B: Long-Run Macroeconomic Adjustments

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

Correct AnswerverifiedShow Answer

An upward shift of the Phillips Curve is consistent with the occurrence of stagflation.

Correct AnswerverifiedShow Answer

Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In terms of this diagram, the long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

The Phillips Curve suggests a tradeoff between:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which factor contributed to the termination of stagflation in the 1980s?

Correct AnswerverifiedShow Answer

Demand-pull inflation and cost-push inflation are identical concepts because both entail rising nominal wages and rising prices.

Correct AnswerverifiedShow Answer

Which of the following most significantly contributed to the 1970s' and the early 1980s' stagflation in Canada?

Correct AnswerverifiedShow Answer

Refer to the above graph.The economy is at point B2, and aggregate demand increases.In the short run, the economy will:

Correct AnswerverifiedShow Answer

Refer to the above graph.Assume that the economy is at equilibrium at AD1 and AS1 and then is hit with both demand-pull and cost-push inflation.If this occurs, then, in the short run:

Correct AnswerverifiedShow Answer

A criticism of the arguments for tax cuts made by supply-side economists is that the:

Correct AnswerverifiedShow Answer

Most economists reject the idea of a long-run tradeoff between unemployment and inflation.

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 AnswerverifiedShow Answer

Refer to the above diagram.The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1.Demand-pull inflation in the short run is best shown as:

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 graph below.The effects of stagflation, in the short run, are best represented by a shift from:

Correct AnswerverifiedShow Answer

The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment.

Correct AnswerverifiedShow Answer

A basic criticism of supply-side economics is that:

Correct AnswerverifiedShow Answer

Demand-pull inflation in the short run increases the price level and:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In terms of this diagram, the long-run aggregate supply curve:

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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Correct Answer
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Refer to the above graph.The economy is at point B₂, and aggregate demand increases.In the short run, the economy will:

Correct Answer
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Refer to the above graph.Assume that the economy is at equilibrium at AD₁ and AS₁ and then is hit with both demand-pull and cost-push inflation.If this occurs, then, in the short run:

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.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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Refer to the above diagram.The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.Demand-pull inflation in the short run is best shown as:

Correct Answer
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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
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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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