Deck 33: 4: Sec 334 Mc the Aggregate-Supply Curve

Question 1

In countries that have high minimum wages and require a lengthy and costly process to get permission to open a business

A)Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve.
B)Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.
C)Reducing the minimum wage would shift long-run aggregate supply to the right.Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve.
D)Reducing the minimum wage would have no affect on the long-run aggregate supply curve.Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.

Answer 1

B

Question 2

The discovery of a large amount of previously-undiscovered oil in the U.S.would shift

A)the long-run aggregate-supply curve to the right.
B)the long-run aggregate-supply curve to the left.
C)the aggregate-demand curve to the left.
D)None of the above is correct.

Answer 2

C

Question 3

The long-run aggregate supply curve shifts right if

A)either immigration from abroad increases or technology improves.
B)immigration from abroad increases,but not if technology improves.
C)technology improves,but not if immigration from abroad increases.
D)None of the above are correct.

Answer 3

C

Question 4

Which of the following is correct?

A)The short-run,but not the long-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)The long-run,but not the short-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Question 5

The long-run aggregate supply curve shifts left if

A)the capital stock increases.
B)there is a natural disaster.
C)the government removes some environmental regulations that limit production methods.
D)None of the above is correct.

Question 6

Which of the following shifts long-run aggregate supply right?

A)an increase in either technology or the human capital stock.
B)an increase in human capital but not technology.
C)an increase in technology,but not the human capital stock.
D)neither an increase in technology nor the human capital stock.

Question 7

The classical dichotomy and monetary neutrality are represented graphically by

A)an upward-sloping long-run aggregate-supply curve.
B)a vertical long-run aggregate-supply curve.
C)an upward-sloping short-run aggregate-curve.
D)a downward-sloping aggregate-demand curve.

Question 8

The long-run aggregate supply curve shifts right if

A)the price level rises.
B)the price level falls.
C)the capital stock increases.
D)the capital stock decreases.

Question 9

The long-run aggregate supply curve would shift right if the government were to

A)reduce the minimum-wage.
B)make unemployment benefits more generous.
C)raise taxes on investment spending.
D)All of the above are correct.

Question 10

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

A)in the price level and output.
B)in the price level,but not output.
C)in output,but not the price level.
D)in neither the price level nor output.

Question 11

Figure 33-3.
Refer to Figure 33-3.The natural rate of output occurs at

A)Y₁.
B)Y₂.
C)Y₃.
D)both Y₁ and Y₃.

Question 12

Which of the following shifts the long-run aggregate supply curve to the left?

A)either an increase in the price of imported natural resources or a reduction in trade restrictions.
B)neither an increase in the price of imported natural resources or a reduction in trade restrictions.
C)an increase in the price of imported natural resources and an increase in trade restrictions.
D)an increase in trade restrictions and a decrease in the price of imported natural resources.

Question 13

The position of the long-run aggregate supply curve

A)is determined by resource usage and technology.
B)is at the point where the unemployment rate is zero.
C)shifts to the right when the money supply increases.
D)is at the point where the economy would cease to grow.

Question 14

The long-run aggregate supply curve shifts right if

A)immigration from abroad increases.
B)the capital stock increases.
C)technology advances.
D)All of the above are correct.

Question 15

Which of the following is not a determinant of the long-run level of real GDP?

A)the price level.
B)the amount of capital used by firms.
C)available stock of human capital.
D)available technology

Question 16

The long-run aggregate supply curve

A)is vertical.
B)is a graphical representation of the classical dichotomy.
C)indicates monetary neutrality in the long run.
D)All of the above are correct.

Question 17

Which of the following would shift the long-run aggregate supply curve right?

A)both an increase in the capital stock and an increase in the price level
B)an increase in the capital stock,but not an increase in the price level
C)an increase in the money supply,but not an increase in the capital stock
D)neither an increase in the money supply nor an increase in the capital stock

Question 18

Which of the following shifts the long-run aggregate supply curve to the right?

A)both an increase in the capital stock and technological improvements
B)an increase in the capital stock but not technological improvements
C)an increase in the capital stock but not technological improvements
D)neither an increase in the capital stock nor an technological improvements

Question 19

The long-run aggregate supply curve would shift left if the amount of labor available

A)increased or Congress made a substantial increase in the minimum wage.
B)decreased or Congress abolished the minimum wage.
C)increased or Congress abolished the minimum wage.
D)decreased or Congress made a substantial increase in the minimum wage.

Question 20

The long-run aggregate supply curve shifts right if

A)technology improves.
B)the price level decreases.
C)the money supply increases.
D)All of the above are correct.

Question 21

Other things the same,continued technological progress and continued increases in the money supply would unambiguously lead to

A)rising prices only.
B)rising real GDP only.
C)rising prices and rising real GDP.
D)neither rising prices nor rising real GDP.

Question 22

According to the aggregate demand and aggregate supply model,in the long run a decrease in the money supply leads to

A)decreases in both the price level and real GDP.
B)an increase in real GDP and an increase in the price level.
C)a decrease in the price level but does not change real GDP.
D)an increase in the price level but does not change real GDP.

Question 23

Other things the same,if the long-run aggregate supply curve shifts left,prices

A)and output both increase.
B)and output both decrease.
C)increase and output decreases.
D)decrease and output increases.

Question 24

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

A)relative to prices wages are higher and employment rise.
B)relative to prices wages are higher and employment falls.
C)relative to prices wages are lower and employment rises.
D)relative to prices wages are lower and employment falls.

Question 25

Other things the same,continued increases in technology lead to

A)continued increases in the price level and real GDP.
B)continued decreases in the price level and real GDP.
C)continued increases in real GDP and continued increases in the price level.
D)continued increases in real GDP and continued decreases in the price level.

Question 26

Which of the following,other things the same,would make the price level decrease and real GDP increase?

A)long-run aggregate supply shifts right
B)long-run aggregate supply shifts left
C)aggregate demand shifts right
D)aggregate demand shifts left

Question 27

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

A)it is only necessary that long-run aggregate supply shifts right over time.
B)it is only necessary that aggregate demand shifts right over time.
C)both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther.
D)None of the above cases would produce rising prices and growing real GDP over time.

Question 28

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.This can be explained

A)only by technological progress.
B)only by money supply growth.
C)by technological progress and money supply growth.
D)None of the above is correct.

Question 29

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

A)production is more profitable and employment rises.
B)production is more profitable and employment falls.
C)production is less profitable and employment rises.
D)production is less profitable and employment falls.

Question 30

Over the last fifty years both real GDP and prices have trended upward in most countries.Continuing real GDP growth and inflation can be explained by

A)continuing technological progress alone.
B)continuing increases in the money supply alone.
C)continued technological progress and continuing increases in the money supply.
D)None of the above can explain continuing real GDP growth and inflation.

Question 31

Which of the following would shift long-run aggregate supply to the right?

A)increased immigration from abroad
B)a decrease in the price of an imported natural resource
C)opening the economy to international trade
D)All of the above are correct.

Question 32

The aggregate supply curve is

A)vertical in the long run and slopes upward in the short run.
B)upward sloping in the long run and vertical in the short run.
C)vertical in the short run and in the long run.
D)upward sloping in the short run and in the long run.

Question 33

Other things the same,continued increases in the money supply lead to

A)continued increases in the price level and real GDP.
B)continued increases in the price level but not continued increases in real GDP.
C)continued increases in real GDP but not continued increases in the price level.
D)a one-time permanent increase in both prices and real GDP.

Question 34

A candidate for political office announces the following policies which,she says,economics clearly demonstrates will lead to higher output in the long run: 1.increase immigration from abroad 2.make trade more open between the US and other countries.

A)1 and 2 both shift long-run aggregate supply right.
B)1 and 2 both shift long-run aggregate supply left.
C)1 shifts long-run aggregate supply right,2 shifts long-run aggregate supply left.
D)1 shifts long-run aggregate supply left,2 shifts long-run aggregate supply right.

Question 35

Wages tend to be sticky

A)because of contracts,social norms,and notions of fairness.
B)because of contracts,but not social norms or notions of fairness.
C)because of social norms and notions of fairness,but not contracts.
D)None of the above are correct.

Question 36

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

A)production is more profitable and employment rises.
B)production is more profitable and employment falls.
C)production is less profitable and employment rises.
D)production is less profitable and employment falls.

Question 37

The aggregate supply curve is upward sloping in

A)the short and long run.
B)neither the short nor long run.
C)the long run,but not the short run.
D)the short run,but not the long run.

Question 38

Other things the same,if the long-run aggregate supply curve shifts right,prices

A)and output both increase.
B)and output both decrease.
C)increase and output decreases.
D)decrease and output increases.

Question 39

In the long run,an increase in the stock of human capital

A)and increases in the money supply both make the price level rise.
B)and increases in the money supply both make the price level fall.
C)makes the price level rise,while increases in the money supply make prices fall.
D)makes the price level fall,while increases in the money supply make prices rise.

Question 40

Other things the same,if technology increases,then in the long run

A)both output and prices are higher.
B)output is higher and prices are lower.
C)output is lower and prices are higher.
D)both output and prices are lower.

Question 41

Other things the same,if workers and firms expected inflation to be 2%,but it is only 1% then

A)employment and production rise.
B)employment rises and production falls.
C)employment falls and production rises.
D)employment and production fall.

Question 42

Other things the same,an unexpected fall in the price level results in some firms having

A)lower than desired prices,which increases their sales.
B)lower than desired prices,which depresses their sales.
C)higher than desired prices,which increases their sales.
D)higher than desired prices,which depresses their sales.

Question 43

Which of the following can explain the upward slope of the short-run aggregate supply curve?

A)nominal wages are slow to adjust to changing economic conditions
B)as the price level falls,the exchange rate falls
C)an increase in the money supply lowers the interest rate
D)an increase in the interest rate increases investment spending

Question 44

Other things the same,if the price level rises by 2% and people were expecting it to rise by 5%,then some firms have

A)higher than desired prices,which increases their sales.
B)higher than desired prices,which depresses their sales.
C)lower than desired prices,which increases their sales.
D)lower than desired prices,which depresses their sales.

Question 45

Other things the same,if prices fell when firms and workers were expecting them to rise,then

A)employment and production would rise.
B)employment would rise and production would fall.
C)employment would fall and production would rise.
D)employment and production would fall.

Question 46

People had been expecting the price level to be 120 but it turns out to be 122.In response Robinson Tire Company increases the number of workers it employs.What could explain this?

A)both sticky price theory and sticky wage theory
B)sticky price theory but not sticky wage theory
C)sticky wage theory but not sticky price theory
D)neither sticky wage theory nor sticky price theory

Question 47

If there are sticky wages,and the price level is greater than what was expected,then

A)the quantity of aggregate goods and services supplied falls,which is shown by a shift of the short-run aggregate supply curve to the left.
B)the quantity of aggregate goods and services supplied falls,as shown by a movement to the left along the short-run aggregate supply curve.
C)the quantity of aggregate goods and services supplied rises,as shown by a shift of the short-run aggregate supply curve to the right.
D)the quantity of aggregate goods and services supplied rises,as shown by a movement to the right along the short-run aggregate supply curve.

Question 48

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

A)higher than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
B)higher than desired prices,which leads to a decrease in the aggregate quantity of goods and service supplied.
C)lower than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
D)lower than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied

Question 49

Sticky nominal wages can result in

A)lower profits for firms when the price level is lower than expected.
B)a decrease in real wages when the price level is lower than expected.
C)a short-run aggregate-supply curve that is vertical.
D)a long-run aggregate-supply curve that is upward-sloping.

Question 50

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

A)less than it desires and increase its production.
B)less than it desires and decrease its production.
C)more than it desires and increase its production.
D)less than it desires and decrease its production.

Question 51

Other things the same,if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent,then

A)employment and production rise.
B)employment rises and production falls.
C)employment falls and production rises.
D)employment and production fall.

Question 52

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

A)the price level is higher than expected making production more profitable.
B)the price level is higher than expected making production less profitable.
C)the price level is lower than expected making production more profitable.
D)the price level is higher than expected making production less profitable.

Question 53

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms have

A)higher than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
B)higher than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied.
C)lower than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
D)lower than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied.

Question 54

Menu costs help explain

A)sticky-price theory.
B)misperceptions theory.
C)sticky-wage theory.
D)All of the above are correct.

Question 55

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

A)higher than desired prices,which increases their sales.
B)higher than desired prices,which depresses their sales.
C)lower than desired prices,which increases their sales.
D)lower than desired prices,which depresses their sales.

Question 56

If wages are sticky,then a greater than expected increase in the price level

A)raises the real costs of production,so the short-run aggregate supply curve shifts left.
B)raises the real costs of production,so the aggregate quantity of goods and services declines.
C)reduces the real costs of production,so the short-run aggregate supply curve shifts right.
D)reduces the real costs of production,so the aggregate quantity of goods and services rises.

Question 57

Other things the same,when the price level rises more than expected,some firms will have

A)higher than desired prices,which increases their sales.
B)higher than desired prices,which depresses their sales.
C)lower than desired prices,which increases their sales.
D)lower than desired prices,which depresses their sales.

Question 58

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy,occurs in

A)nominal-supply theory.
B)stagflation.
C)misperceptions theory.
D)sticky-wage theory.

Question 59

If the price level rises above what was expected and nominal wages are fixed,then

A)production becomes less profitable so firms will hire fewer workers.
B)production becomes less profitable so firms will hire more workers.
C)production becomes more profitable so firms will hire fewer workers.
D)production becomes more profitable so firms will hire more workers.

Question 60

The sticky-price theory implies that

A)the short-run aggregate-supply curve is upward-sloping.
B)an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce.
C)menu costs influence the speed of adjustment of prices.
D)All of the above are correct.

Question 61

An increase in the expected price level shifts the

A)short-run and long-run aggregate supply curves left.
B)the short-run but not the long-run aggregate supply curve left.
C)the long-run but not the short-run aggregate supply curve left.
D)neither the long-run nor the short-run aggregate supply curve left.

Question 62

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

A)temporarily low and so supply a smaller quantity of labor.
B)temporarily low and so supply a larger quantity of labor.
C)temporarily high and so supply a smaller quantity of labor.
D)temporarily high and so supply a larger quantity of labor.

Question 63

People had been expecting the price level to be 140 but it turns out to be 138.Johnson Family Restaurants increases the number of workers it employs.What could explain this?

A)both sticky price theory and sticky wage theory
B)sticky price theory but not sticky wage theory
C)sticky wage theory but not sticky price theory
D)neither sticky wage theory nor sticky price theory

Question 64

A change in the expected price level is likely to cause which of the following?

A)a shift in the short-run aggregate supply curve and long-run aggregate supply curve
B)a shift in the short run aggregate supply curve
C)a shift in the aggregate demand curve
D)a shift in the long-run aggregate supply curve

Question 65

In the aggregate demand and aggregate supply model,sticky wages,sticky prices,and misperceptions about relative prices

A)have temporary effects.
B)explain why the short run aggregate supply curve might shift.
C)explain why the aggregate demand curve is downward sloping.
D)explain monetary neutrality.

Question 66

Assuming that a is positive,theories of short-run aggregate supply are expressed mathematically as

A)quantity of output supplied = natural rate of output + a(actual price level - expected price level).
B)quantity of output supplied = natural rate of output + a(expected price level - actual price level).
C)quantity of output supplied = a(actual price level -expected price level)- natural rate of output.
D)quantity of output supplied = a(expected price level - actual price level)- natural rate of output.

Question 67

The effects of a higher than expected price level are shown by

A)shifting the short-run aggregate supply curve right.
B)shifting the short-run aggregate supply curve left.
C)moving to the right along a given aggregate supply curve.
D)moving to the left along a given aggregate supply curve.

Question 68

Other things the same,if the price level is lower than expected,then some firms believe that the relative price of what they produce has

A)decreased,so they increase production.
B)decreased,so they decrease production.
C)increased,so they increase production.
D)increased,so they decrease production.

Question 69

If the actual price level is 165,but people had been expecting it to be 160,then

A)the quantity of output supplied rises,but only in the short run.
B)the quantity of output supplied rises in the short run and the long run.
C)the quantity of output supplied falls,but only in the short run.
D)the quantity of output supplied falls in the short run and the long run.

Question 70

If the price level is higher than expected,firms might raise their production in the short run if

A)the nominal wage they pay their employees was set based on the expected price level.
B)prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
C)they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level.
D)All of the above are correct.

Question 71

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level),expresses

A)how the long run equilibrium adjusts to changes in money supply.
B)how output deviates in the short run from its long run natural rate.
C)how the short run aggregate supply curve shifts.
D)how adverse shifts in aggregate supply can cause stagflation.

Question 72

According to the misperceptions theory of the short-run aggregate supply curve,if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent,then the firm would believe that the relative price of what it produces had

A)increased,so it would increase production.
B)increased,so it would decrease production.
C)decreased,so it would increase production.
D)decreased,so it would decrease production.

Question 73

Other things the same,the aggregate quantity of output supplied will increase if the price level

A)is lower than expected so that firms believe the relative price of their output has increased.
B)is lower than expected so that firms believe the relative price of their output has decreased.
C)is higher than expected so that firms believe the relative price of their output has increased.
D)is higher than expected so that firms believe the relative price of their output has decreased.

Question 74

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level),where a is a positive number,represents

A)an upward-sloping short-run aggregate supply curve
B)a vertical short-run aggregate supply curve
C)a downward-sloping aggregate demand curve
D)None of the above is correct.

Question 75

Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

A)
B)
C)
D)

Question 76

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

A)increased,so it would increase production.
B)increased,so it would decrease production.
C)decreased,so it would increase production.
D)decreased,so it would decrease production.

Question 77

When the actual change in the price level differs from its expected change,which of the following can explain why firms might change their production?

A)both menu costs and mistaking a price level change for a change in relative prices
B)menu costs but not mistaking a price level change for a change in relative prices
C)mistaking a price level change for a change in relative price but not menu costs
D)neither menu costs nor mistaking a price level change for a change in relative prices

Question 78

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected,then some firms believe that the relative price of what they produce has

A)decreased,so they increase production.
B)decreased,so they decrease production.
C)increased,so they increase production.
D)increased,so they decrease production.

Question 79

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

A)increases by less than expected so that firms believe the relative price of their output has increased.
B)increases by less than expected so that firms believe the relative price of their output has decreased.
C)increases by more than expected so that firms believe the relative price of their output has increased.
D)increases by more than expected so that firms believe the relative price of their output has decreased.

Question 80

Other things the same,the aggregate quantity of output supplied will decrease if the price level

A)is lower than expected so that firms believe the relative price of their output has increased.
B)is lower than expected so that firms believe the relative price of their output has decreased.
C)is higher than expected so that firms believe the relative price of their output has increased.
D)is higher than expected so that firms believe the relative price of their output has decreased.