Question 1

According to the simple extended AD-AS model, if the economy is in a recession, prices and nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that real output returns to its full-employment level in the long run.

Accepted Answer

A) True 
 B)False

Question 2

When the rate of inflation is decreasing, this economic condition is called

Accepted Answer

A)  disinflation.
B)  depreciation.
C)  stagflation.
D)  deflation.E) All of the above
F) A) and B)

Question 3

In terms of aggregate supply, the difference between the long run and the short run is that in the long run,

Accepted Answer

A)  the price level is variable.
B)  employment is variable.
C)  real output is variable.
D)  nominal wages and other input prices are fully responsive to price-level changes.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

(Consider This)  The ideas of economist Arthur Laffer became the centerpiece for tax policy during the

Accepted Answer

A)  Ford administration.
B)  Clinton administration.
C)  Nixon administration.
D)  Reagan administration.E) C) and D)
F) A) and C)

Question 6

The long-run Phillips Curve is essentially a horizontal line at the economy's natural rate of inflation.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inflation rate: 6 percent.What is the misery index for this nation?

Accepted Answer

A)  15 percent
B)  31 percent
C)  34 percent
D)  53 percentE) None of the above
F) A) and C)

Question 8

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) A) and D)
F) All of the above

Question 9

According to the simple extended AD-AS model, cost-push inflation does not last in the long run if the government leaves the economy alone.

Accepted Answer

A) True 
 B)False

Question 10

In the extended AD-AS model, the long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 11

The Romer and Romer 2010 paper in the American Economic Review identified the major motivations for most significant legislated tax changes to be the following, except

Accepted Answer

A)  adjustments made to match changes in government spending.
B)  offsetting the monetary policy pursued by the Federal Reserve.
C)  addressing an inherited budget deficit.
D)  promoting long-run economic growth.E) None of the above
F) A) and B)

Question 12

In the period 2011 through 2015, as the economy slowly mended, the economy experienced an ongoing pattern of falling inflation coinciding with falling unemployment.This suggests a

Accepted Answer

A)  movement up and to the left along a stable Phillips curve.
B)  movement down and to the right along a stable Phillips curve.
C)  Phillips curve shifting to the right.
D)  Phillips curve shifting to the left.E) A) and D)
F) B) and D)

Question 13

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 output is constant.
D)  nominal wages and other resource prices are unresponsive to price-level changes.E) A) and C)
F) All of the above

Question 14

If the expected rate of inflation rises, then the short-run Phillips Curve will

Accepted Answer

A)  shift to the right.
B)  shift to the left.
C)  become vertical.
D)  become flat.E) B) and C)
F) None of the above

Question 15

Supply-side economists recommend higher marginal tax rates to increase aggregate supply and real output.

Accepted Answer

A) True 
 B)False

Question 16

The Laffer Curve indicates that lower tax rates will increase output.

Accepted Answer

A) True 
 B)False

Question 17

The last few years of the 1990s in the United States were characterized by

Accepted Answer

A)  low inflation and high unemployment.
B)  stagflation.
C)  low inflation and low unemployment.
D)  a high misery index.E) B) and D)
F) B) and C)

Question 18

According to the simple extended AD-AS model, aggregate demand is a major determinant of the level of output in the long run.

Accepted Answer

A) True 
 B)False

Question 19

The economy enters the long-run once

Accepted Answer

A)  nominal wages become equal to real wages.
B)  real wages become equal to nominal wages.
C)  sufficient time has elapsed for wage contracts to expire and nominal wages to adjust to output-price changes.
D)  sufficient time has elapsed for real GDP to increase and unemployment to decrease as a consequenceE) A) and B)
F) B) and D)

Question 20

Other things equal, a decrease in the price level will

Accepted Answer

A)  shift the 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 an aggregate supply curve.E) A) and B)
F) A) and C)

Exam 38: Extending the Analysis of Aggregate Supply

In the extended AD-AS model, the long-run aggregate supply curve is vertical.

Correct AnswerverifiedShow Answer

The economy enters the long-run once

Correct AnswerverifiedShow Answer

In the period 2011 through 2015, as the economy slowly mended, the economy experienced an ongoing pattern of falling inflation coinciding with falling unemployment.This suggests a

Correct AnswerverifiedShow Answer

According to the simple extended AD-AS model, cost-push inflation does not last in the long run if the government leaves the economy alone.

Correct AnswerverifiedShow Answer

Stagflation refers to

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 terms of aggregate supply, the difference between the long run and the short run is that in the long run,

Correct AnswerverifiedShow Answer

The long-run Phillips Curve is essentially a horizontal line at the economy's natural rate of inflation.

Correct AnswerverifiedShow Answer

The last few years of the 1990s in the United States were characterized by

Correct AnswerverifiedShow Answer

Consider the following national data: tax revenues as a percentage of GDP: 25 percent; government spending as a percentage of GDP: 31 percent; unemployment rate: 9 percent; inflation rate: 6 percent.What is the misery index for this nation?

Correct AnswerverifiedShow Answer

Supply-side economists recommend higher marginal tax rates to increase aggregate supply and real output.

Correct AnswerverifiedShow Answer

When the rate of inflation is decreasing, this economic condition is called

Correct AnswerverifiedShow Answer

If the expected rate of inflation rises, then the short-run Phillips Curve will

Correct AnswerverifiedShow Answer

The Laffer Curve indicates that lower tax rates will increase output.

Correct AnswerverifiedShow Answer

According to the simple extended AD-AS model, if the economy is in a recession, prices and nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that real output returns to its full-employment level in the long run.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the simple extended AD-AS model, aggregate demand is a major determinant of the level of output in the long run.

Correct AnswerverifiedShow Answer

(Consider This) The ideas of economist Arthur Laffer became the centerpiece for tax policy during the

Correct AnswerverifiedShow Answer

The Romer and Romer 2010 paper in the American Economic Review identified the major motivations for most significant legislated tax changes to be the following, except

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