Chapter 10
Consider schedule #1 in the aggregate demand and aggregate supply table given below. The equilibrium output and price level for the economy described on this schedule are:
$6.0 and 130, respectively
For the aggregate demand and aggregate supply listed in schedule # 2 of the table given below, the equilibrium output level and price level are:
$6.5 and 130, respectively
Which of the following policies can help get an economy out of a recessionary trap?
All of the above
In resolving a recessionary situation, which of the following is a goal of the government:
All of the above except d are correct.
Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?
Frictional, seasonal, and structural unemployment
Suppose Jack's salary increased from $100,000 to $200,000 per year between 2004 and 2014 and the price index increased from 100 to 300 during the same period. Which of the following statements best describes Jack's situation?
His real income has decreased and money income has increased.
Identify the correct statement.
In periods of high inflation, real wages change even if nominal wages remain constant
Actual output can exceed its potential level only in the short run but not in the long run because:
In the long run, all resources prices can be varied and that adjustment in prices takes the economy back to its long run potential
Which of these is true of the expected price level in a labor market?
It allows firms and resource owners to make long-term wage agreements.
Which of the following is true of the short-run aggregate supply curve?
It shows the relation between the price level and the quantity of aggregate output firms supply, other things constant.
Three broad policies actions that could be taken to resolve a recessionary situation include:
Only a, b, and c are correct
Which of the following is true in the short run?
Per-unit costs do not increase as much as output prices when the price level rises.
Which of these is not assumed to be constant along a short-run aggregate supply curve?
The actual price level
Which of the following explains the shape of the short-run aggregate supply curve?
The direct relationship between quantity supplied and the price level
Which of the following is true?
The nominal wage and the real wage will change by the same amount if the price level is constant.
Potential output depends on all of the following except one. Which is the exception?
The number of consumers in the market
In a recessionary trap, the economy is characterized by:
a, b, and c are all correct
The long run is the period of time during which:
all resource prices can be varied.
When the actual price level in an economy turns out to be lower than that expected in the short run, _____.
businesses cut back production
If the price level in an economy turns out to be higher than that expected by workers and firms, _____.
businesses increase production
Which of the following policies can help resolve an inflationary situation?
c and d are both correct
When an economy produces its potential output, _____ is zero.
cyclical unemployment
Suppose the price level increases by 5 percent and the nominal wages of workers increase by 3 percent during a particular year. This implies that the real wage has:
declined by 2 percent.
The short-run aggregate supply curve shows a(n):
direct relationship between the actual price level and real GDP supplied.
If the actual price level is higher than the expected price level in an economy, the economy will:
expand output in the short run.
The potential output of an economy is the level of output produced when the:
expected price level equals the actual price level.
Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2. This implies that the price level has:
fallen by 10 percent.
If the price level in the current year is much higher than the expected price level in an economy, ____
firms will increase production beyond the economy's potential level
In an inflationary situation, the economy is characterized by:
high inflation but the unemployment rate is below the natural rate of unemployment
The fact that some resource prices are fixed by contracts help explain why firms:
increase output in the short run when the price level increases.
Suppose the real wage remains unchanged between Year 1 and Year 2 but the nominal wage increases from $20 to $24. Based on this information, we can conclude that the price level has:
increased by 20 percent.
The short-run aggregate supply curve:
is positively sloped.
The nominal wage is:
measured in current dollars rather than in constant dollars.
When actual output exceeds potential output, _____.
prices tend to increase.
In resolving a recessionary situation, the government is attempting to:
reduce the unemployment rate and also raise prices
At any point in time, an economy can find itself in one of the following states except one:
stagflation
In constructing the short-run aggregate supply curve, we define the short run as the period in which:
the costs of some resources are fixed.
When the economy's actual price level exceeds the expected price level in the short run, __________.
the real wages of workers decline
The real wage is equal to the:
wage measured in terms of the quantity of goods and services it buys.
In resolving an inflationary situation, which one of the following is NOT a goal of the government:
win both houses of congress at the next election
