Question 1

In the extended aggregate demand-aggregate supply model,

Accepted Answer

A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
B)  the long-run aggregate supply curve is horizontal.
C)  the level of real output is the same in the long run regardless of the location of the aggregate demand curve.
D)  the short-run aggregate supply curve is downsloping.E) B) and C)
F) B) and D)

Question 2

If graphed, the relationship shown would depict this economy's

Accepted Answer

A)  Laffer Curve.
B)  Lorenz Curve.
C)  Tax Freedom Curve.
D)  Phillips Curve.E) A) and D)
F) A) and C)

Question 3

The inflation and unemployment data for the 1970s suggest that the aggregate-supply shocks of that period caused the

Accepted Answer

A)  relationship between the unemployment rate and the rate of inflation to remain stable and predictable and to exhibit a clear trade-off.
B)  relationship between the unemployment rate and the rate of inflation to be similar to that found during the 1960s.
C)  Phillips Curve to shift to the right.
D)  Phillips Curve to shift to the left.E) B) and C)
F) All of the above

Question 4

From the perspective of supply-side economists, a cut in tax rates will

Accepted Answer

A)  increase output but will increase the budget deficit.
B)  increase unemployment but will reduce the budget deficit.
C)  reduce unemployment but will increase the budget deficit.
D)  reduce unemployment and also reduce the budget deficit.E) All of the above
F) A) and B)

Question 5

In the extended aggregate demand-aggregate supply model,

Accepted Answer

A)  long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
B)  the long-run aggregate supply curve is horizontal.
C)  the price level is the same regardless of the location of the aggregate demand curve.
D)  long-run equilibrium occurs at the intersection of the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.E) B) and C)
F) A) and B)

Question 6

A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating

Accepted Answer

A)  an easy money policy.
B)  a tight money policy.
C)  a supply-side fiscal policy.
D)  a contractionary fiscal policy.Test Bank: II Topic: Taxation and Aggregate SupplyE) All of the above
F) A) and C)

Question 7

In the long run, demand-pull inflation

Accepted Answer

A)  starts out with a shift in the AS curve but no shift of the AD curve.
B)  starts out with a rightward shift in the AD curve, followed by a resulting leftward shift of the short-run AS curve.
C)  starts out with a leftward shift in the AD curve, followed by a resulting rightward shift of the short-run AS curve.
D)  involves a shift of the AD curve only, with no shift of the AS curve.E) B) and C)
F) C) and D)

Question 8

The traditional Phillips Curve suggests a trade-off between

Accepted Answer

A)  price stability and income equality.
B)  the level of unemployment and inflation.
C)  unemployment and income equality.
D)  economic growth and full employment.E) B) and C)
F) A) and D)

Question 9

Which presidential administration is most closely associated with the economic policies of supply-side economics?

Accepted Answer

A)  Clinton
B)  Obama
C)  Reagan
D)  BushE) B) and D)
F) A) and B)

Question 10

If government uses fiscal policy to restrain cost-push inflation, we can expect

Accepted Answer

A)  the unemployment rate to rise.
B)  the unemployment rate to fall.
C)  the aggregate demand curve to shift rightward.
D)  tax-rate declines and increases in government spending.E) A) and B)
F) A) and C)

Question 11

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) C) and D)

Question 12

Disinflation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inflation is initially less than the expected rate, causing the unemployment rate to

Accepted Answer

A)  rise temporarily.However, consequent decreases in nominal wages will eventually bring the actual and expected rates of inflation into balance.
B)  rise temporarily.However, consequent increases in nominal wages will eventually bring the actual and expected rates of inflation into balance.
C)  fall temporarily.However, consequent increases in nominal wages will eventually bring the actual and expected rates of inflation into balance.
D)  fall temporarily.However, consequent decreases in nominal wages will eventually bring the actual and expected rates of inflation into balance.E) None of the above
F) C) and D)

Question 13

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

Accepted Answer

A) True 
 B)False

Question 14

In the context of the Phillips curve, stagflation can only be understood as a rightward shift of the curve.

Accepted Answer

A) True 
 B)False

Question 15

One criticism against supply-side cuts in marginal tax rates is that they fail to

Accepted Answer

A)  decrease disinflation in the economy.
B)  decrease demand-pull inflation in the economy.
C)  increase aggregate supply more rapidly than aggregate demand.
D)  increase aggregate demand more rapidly than aggregate supply.E) B) and C)
F) A) and D)

Question 16

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

Accepted Answer

A) True 
 B)False

Question 17

If the economy is operating in the intermediate range of the aggregate supply curve, then the greater the rate of growth of aggregate demand, the

Accepted Answer

A)  greater the resulting increase in the price level, the greater the rate of growth of output, and the greater the unemployment rate.
B)  greater the resulting increase in the price level, the lower the rate of growth of output, and the greater the unemployment rate.
C)  less the resulting increase in the price level, the lower the rate of growth of output, and the greater the unemployment rate.
D)  greater the resulting increase in the price level, the greater the rate of growth of output, and the lower the unemployment rate.E) B) and C)
F) A) and D)

Question 18

Demand-pull inflation and cost-push inflation have similar effects on real output in the short run.

Accepted Answer

A) True 
 B)False

Question 19

The long-run aggregate supply curve is vertical

Accepted Answer

A)  because the rate of inflation is steady in the long run.
B)  because resource prices eventually rise and fall with product prices.
C)  because product prices tend to increase at a faster rate than resource prices.
D)  only when the money supply increases at the same rate as real GDP.E) C) and D)
F) A) and B)

Question 20

The long-run Phillips Curve is vertical at

Accepted Answer

A)  a price level of 100.
B)  the natural rate of unemployment.
C)  the natural rate of inflation.
D)  potential GDP.E) All of the above
F) A) and B)

Exam 38: Extending the Analysis of Aggregate Supply

In the context of the Phillips curve, stagflation can only be understood as a rightward shift of the curve.

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve shifts to the left when nominal wages rise in response to price level increases.

Correct AnswerverifiedShow Answer

If graphed, the relationship shown would depict this economy's

Correct AnswerverifiedShow Answer

In the long run, demand-pull inflation

Correct AnswerverifiedShow Answer

The traditional Phillips Curve suggests a trade-off between

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve is vertical

Correct AnswerverifiedShow Answer

Disinflation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inflation is initially less than the expected rate, causing the unemployment rate to

Correct AnswerverifiedShow Answer

An adverse aggregate supply shock could result from

Correct AnswerverifiedShow Answer

One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

Correct AnswerverifiedShow Answer

The long-run Phillips Curve is vertical at

Correct AnswerverifiedShow Answer

Which presidential administration is most closely associated with the economic policies of supply-side economics?

Correct AnswerverifiedShow Answer

One criticism against supply-side cuts in marginal tax rates is that they fail to

Correct AnswerverifiedShow Answer

The inflation and unemployment data for the 1970s suggest that the aggregate-supply shocks of that period caused the

Correct AnswerverifiedShow Answer

In the extended aggregate demand-aggregate supply model,

Correct AnswerverifiedShow Answer

If government uses fiscal policy to restrain cost-push inflation, we can expect

Correct AnswerverifiedShow Answer

In the extended aggregate demand-aggregate supply model,

Correct AnswerverifiedShow Answer

A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating

Correct AnswerverifiedShow Answer

From the perspective of supply-side economists, a cut in tax rates will

Correct AnswerverifiedShow Answer

Demand-pull inflation and cost-push inflation have similar effects on real output in the short run.

Correct AnswerverifiedShow Answer

If the economy is operating in the intermediate range of the aggregate supply curve, then the greater the rate of growth of aggregate demand, the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified