Question 1

-Refer to the above 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) B) and C)
F) None of the above

Question 2

With demand-pull inflation in the long-run AD-AS model, there is:

Accepted Answer

A)   a decrease in aggregate demand that eventually increases nominal wages and causes a decrease in the short-run aggregate supply curve.
B)   an increase in aggregate demand that eventually increases nominal wages and causes an increase in the short-run aggregate supply curve.
C)   an increase in aggregate demand that eventually decreases nominal wages and causes a decrease in the short-run aggregate supply curve.
D)   an increase in aggregate demand that eventually increases nominal wages and causes a decrease in the short-run aggregate supply curve.E) B) and C)
F) A) and B)

Question 3

1. An increase in aggregate demand will tend to: A)  temporarily shift the economy to point B2. B)  temporarily shift the economy to point C1. C)  permanently shift the economy to point C1. D)  have no effect in shifting the economy from point B1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above graph. Assume the economy is at the initial position of B1. An increase in aggregate demand will tend to:

Accepted Answer

A)   temporarily shift the economy to point B2.
B)   temporarily shift the economy to point C1.
C)   permanently shift the economy to point C1.
D)   have no effect in shifting the economy from point B1.E) All of the above
F) A) and B)

Question 4

The characteristics of the long-run Phillips Curve suggest that the economy is generally stable at its natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 5

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 B)
F) B) and C)

Question 6

The basic problem portrayed by the Phillips Curve is:

Accepted Answer

A)   that a level of aggregate demand sufficiently high to result in full employment may also cause inflation.
B)   that changes in the composition of total labor demand tend to be deflationary.
C)   that unemployment rises at the same time the general price level is rising.
D)   the possibility that automation will increase the level of noncyclical unemployment.E) A) and C)
F) All of the above

Question 7

-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) A) and C)
F) C) and D)

Question 8

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 9

-The above curve is known as the:

Accepted Answer

A)   tax "wedge" curve.
B)   Okun Curve.
C)   Laffer Curve.
D)   Phillips Curve.E) All of the above
F) C) and D)

Question 10

An ongoing economic growth causes continuous leftward shifts of the aggregate supply which, by themselves, would tend to cause an ongoing deflation.

Accepted Answer

A) True 
 B)False

Question 11

Inflation accompanied by falling real output and employment is known as:

Accepted Answer

A)   Laffer's law.
B)   Okun's law.
C)   stagflation.
D)   the Phillips Curve.E) A) and B)
F) None of the above

Question 12

-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. In the long run, the decline in the actual rate of inflation from 6 percent to 4 percent will:

Accepted Answer

A)   reduce the unemployment rate.
B)   reduce corporate profits in real terms.
C)   have no effect on the unemployment rate.
D)   reduce real domestic output.E) A) and C)
F) A) and B)

Question 13

The long-run Phillips Curve is vertical at the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 14

-The above diagram describes the notion that as tax:

Accepted Answer

A)   revenues increase from zero to 100 percent, tax rates will increase from zero to some maximum level and then decline to zero.
B)   rates increase from zero to 100 percent, tax revenue will increase from zero to some maximum level and decline to zero.
C)   rates decrease from 100 to zero percent, tax revenue will decrease from 100 percent to a maximum level.
D)   rates increase from zero to 100 percent, tax revenue will increase from zero to a maximum level.E) A) and B)
F) None of the above

Question 15

Cost-push inflation results directly from a(n) :

Accepted Answer

A)   decrease in per unit production costs that shift the short-run aggregate supply curve to the right .
B)   increase in per unit production costs that shift the short-run aggregate supply curve to the left
C)   increase in government spending.
D)   decrease in government regulation.E) A) and B)
F) A) and C)

Question 16

Adverse aggregate supply shocks would result in:

Accepted Answer

A)   a lower rate of inflation and a higher rate of unemployment.
B)   a higher rate of inflation and a lower rate of unemployment.
C)   a lower rate of inflation and a lower rate of unemployment.
D)   a higher rate of inflation and a higher rate of unemployment.E) A) and B)
F) A) and C)

Question 17

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

Question 18

The short run in macroeconomics is a period in which nominal wages:

Accepted Answer

A)   remain fixed as the price level stays constant.
B)   change as the price level stays constant.
C)   remain fixed as the price level changes.
D)   change as the price level changes.E) A) and C)
F) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

If prices and wages are flexible, a recession arising from a decrease in aggregate demand will:

Accepted Answer

A)   decrease the price level.
B)   increase the price level.
C)   increase the interest rate.
D)   increase net exports.E) A) and D)
F) B) and C)

Exam 15: Long-Run Macroeconomic Adjustments

Cost-push inflation results directly from a(n) :

Correct Answer
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-Refer to the above graph. Assume the economy is at the initial position of B₁. An increase in aggregate demand will tend to:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If prices and wages are flexible, a recession arising from a decrease in aggregate demand will:

Correct Answer
verified

Correct Answer
verified

The short run in macroeconomics is a period in which nominal wages:

Correct Answer
verified

The long-run Phillips Curve is vertical at the natural rate of unemployment.

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
verified

Inflation accompanied by falling real output and employment is known as:

Correct Answer
verified

The characteristics of the long-run Phillips Curve suggest that the economy is generally stable at its natural rate of unemployment.

Correct Answer
verified

An ongoing economic growth causes continuous leftward shifts of the aggregate supply which, by themselves, would tend to cause an ongoing deflation.

Correct Answer
verified

Adverse aggregate supply shocks would result in:

Correct Answer
verified

-The above diagram describes the notion that as tax:

Correct Answer
verified

-The above curve is known as the:

Correct Answer
verified

With demand-pull inflation in the long-run AD-AS model, there is:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The basic problem portrayed by the Phillips Curve is:

Correct Answer
verified

Correct Answer
verified

Exam 15: Long-Run Macroeconomic Adjustments

Cost-push inflation results directly from a(n) :

Correct AnswerverifiedShow Answer

-Refer to the above graph. Assume the economy is at the initial position of B1. An increase in aggregate demand will tend to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If prices and wages are flexible, a recession arising from a decrease in aggregate demand will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short run in macroeconomics is a period in which nominal wages:

Correct AnswerverifiedShow Answer

The long-run Phillips Curve is vertical at the natural rate of unemployment.

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

Inflation accompanied by falling real output and employment is known as:

Correct AnswerverifiedShow Answer

The characteristics of the long-run Phillips Curve suggest that the economy is generally stable at its natural rate of unemployment.

Correct AnswerverifiedShow Answer

An ongoing economic growth causes continuous leftward shifts of the aggregate supply which, by themselves, would tend to cause an ongoing deflation.

Correct AnswerverifiedShow Answer

Adverse aggregate supply shocks would result in:

Correct AnswerverifiedShow Answer

-The above diagram describes the notion that as tax:

Correct AnswerverifiedShow Answer

-The above curve is known as the:

Correct AnswerverifiedShow Answer

With demand-pull inflation in the long-run AD-AS model, there is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The basic problem portrayed by the Phillips Curve is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

-Refer to the above graph. Assume the economy is at the initial position of B₁. An increase in aggregate demand will tend to:

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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