Question 1

The short-run Phillips Curve assumes an unchanging

Accepted Answer

A)  actual rate of inflation.
B)  expected rate of inflation.
C)  unemployment rate.
D)  fiscal or monetary policy.E) A) and B)
F) A) and C)

Question 2

Since the Great Recession of 2007-2009

Accepted Answer

A)  the misery index has increased.
B)  the misery index has remained stable.
C)  the movement of the unemployment rate and inflation rate has been inconsistent with a stable Phillips Curve.
D)  the movement of the unemployment rate and inflation rate has been consistent with a stable Phillips Curve.E) A) and B)
F) A) and C)

Question 3

Assume that a person earns $600 per day at a certain job.If the marginal tax rate is cut from 40 percent to 30 percent, then this person's after-tax daily earnings will

Accepted Answer

A)  decrease from $240 to $180.
B)  increase from $480 to $540.
C)  decrease from $540 to $480.
D)  increase from $360 to $420.E) C) and D)
F) A) and B)

Question 4

In the long run, the economy will always move toward full employment.

Accepted Answer

A) True 
 B)False

Question 5

The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience

Accepted Answer

A)  falling input costs, so they will increase their output level.
B)  no change in input costs, so they will not change their output level.
C)  falling inputs costs, so they will reduce their output level.
D)  no change in input costs, so they will reduce their output level.E) None of the above
F) All of the above

Question 6

The long-run aggregate supply curve stays in a fixed position over time.

Accepted Answer

A) True 
 B)False

Question 7

Supply-side economists contend that aggregate supply is the relevant policy factor in influencing the price level and real output in an economy.

Accepted Answer

A) True 
 B)False

Question 8

Demand-pull inflation and cost-push inflation are identical concepts because both involve lower unemployment rates and rising prices.

Accepted Answer

A) True 
 B)False

Question 9

The short run in macroeconomics is a period in which nominal wages remain fixed even as the general price level changes.

Accepted Answer

A) True 
 B)False

Question 10

In the absence of unexpected shocks, the economy will tend to experience

Accepted Answer

A)  positive, noninflationary growth.
B)  no changes in output or prices.
C)  positive growth with mild amounts of deflation.
D)  positive growth with mild amounts of inflation.E) A) and B)
F) A) and C)

Question 11

One central idea in supply-side economics concerning budget deficits is illustrated by the

Accepted Answer

A)  production possibilities curve.
B)  aggregate supply curve.
C)  Laffer Curve.
D)  Phillips Curve.E) C) and D)
F) A) and B)

Question 12

Other things equal, the short-run aggregate supply curve shifts positions when

Accepted Answer

A)  the price level changes.
B)  the rate of inflation changes.
C)  nominal wages and other input prices change.
D)  aggregate demand changes.E) B) and C)
F) A) 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

Which is a basic proposition of supply-side economics?

Accepted Answer

A)  The Federal Reserve should target the federal funds rate rather than the money supply.
B)  Tax-hikes on business reduce productivity and output and reduce aggregate supply.
C)  Low marginal tax rates reduce incentives to work, saving, and investment.
D)  Transfer payments increase incentives to work.E) C) and D)
F) A) and C)

Question 15

The Romer and Romer 2010 paper in the American Economic Review found that tax changes that are made to promote long-run growth or to reduce an inherited budget deficit tend to result in

Accepted Answer

A)  a strong positive relationship between taxes and output GDP.
B)  a weak positive relationship between taxes and output GDP.
C)  an uncertain correlation between taxes and output GDP.
D)  a strong negative relationship between taxes and output GDP.E) B) and C)
F) B) and D)

Question 16

If the government adopts a hands-off approach to cost-push inflation in the economy, then in the short run there is likely to be

Accepted Answer

A)  a rise in real output.
B)  a fall in unemployment.
C)  an inflationary spiral.
D)  a recession.E) A) and B)
F) B) and D)

Question 17

An adverse aggregate supply shock

Accepted Answer

A)  automatically shifts the aggregate demand curve rightward.
B)  causes the Phillips Curve to shift leftward and downward.
C)  can be caused by a boost in the rate of growth of productivity.
D)  can cause stagflation.E) B) and C)
F) A) and D)

Question 18

In the long run, demand-pull inflation leads to

Accepted Answer

A)  higher unemployment and a higher price level.
B)  lower real wages and higher unemployment.
C)  lower real output and no change in unemployment.
D)  a higher price level and no change in real output.E) A) and C)
F) A) and B)

Question 19

In the long run,

Accepted Answer

A)  attempts to "fine-tune" the economy cause the rate of unemployment to accelerate.
B)  there is no inflation-unemployment trade-off.
C)  there is an inflation-unemployment trade-off, and the terms of that trade-off have worsened in recent years.
D)  there is an inflation-unemployment trade-off, but the terms of that trade-off have improved in recent years.E) A) and B)
F) C) and D)

Question 20

Which of the following is a tenet of supply-side economics?

Accepted Answer

A)  High marginal tax rates severely discourage work, saving, and investment.
B)  Increases in Social Security taxes and other business taxes shift the aggregate supply curve to the right.
C)  The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
D)  Transfer payments increase incentives to work.E) C) and D)
F) B) and D)

Exam 38: Extending the Analysis of Aggregate Supply

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

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The short-run Phillips Curve assumes an unchanging

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In the long run,

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The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience

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Since the Great Recession of 2007-2009

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In the absence of unexpected shocks, the economy will tend to experience

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Supply-side economists contend that aggregate supply is the relevant policy factor in influencing the price level and real output in an economy.

Correct AnswerverifiedShow Answer

Which of the following is a tenet of supply-side economics?

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Assume that a person earns $600 per day at a certain job.If the marginal tax rate is cut from 40 percent to 30 percent, then this person's after-tax daily earnings will

Correct AnswerverifiedShow Answer

Other things equal, the short-run aggregate supply curve shifts positions when

Correct AnswerverifiedShow Answer

If the government adopts a hands-off approach to cost-push inflation in the economy, then in the short run there is likely to be

Correct AnswerverifiedShow Answer

One central idea in supply-side economics concerning budget deficits is illustrated by the

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In the long run, demand-pull inflation leads to

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Which is a basic proposition of supply-side economics?

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An adverse aggregate supply shock

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The long-run aggregate supply curve stays in a fixed position over time.

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In the long run, the economy will always move toward full employment.

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The short run in macroeconomics is a period in which nominal wages remain fixed even as the general price level changes.

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Demand-pull inflation and cost-push inflation are identical concepts because both involve lower unemployment rates and rising prices.

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The Romer and Romer 2010 paper in the American Economic Review found that tax changes that are made to promote long-run growth or to reduce an inherited budget deficit tend to result in

Correct AnswerverifiedShow Answer

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