Question 1

If AS increases at a faster rate than AD, the result will be

Accepted Answer

The answer of If AS increases at a faster rate...

Question 2

A reduction in the rate of inflation is known as

Accepted Answer

Disinflation refers to a decrease in the rate of inflation, not to be confused with deflation which is a sustained decrease in the general price level of goods and services.

Question 3

Which of the following is most likely to result in unemployment?

Accepted Answer

The answer of Which of the following is most likely...

Question 4

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S. economy would have experienced

Accepted Answer

If aggregate demand had grown faster than it did from 2009 to 2010, it would have stimulated economic growth, resulting in lower unemployment rates due to increased demand for labor. However, this increase in demand could also lead to inflationary pressures as businesses raise prices to keep up with the higher demand. Therefore, the best choice is D, lower unemployment and higher inflation.

Question 5

A scatter diagram of the position of the U.S. economy from 1972 through 2007 with the price level on the vertical axis and real GDP on the horizontal axis would show a movement generally toward the

Accepted Answer

A movement toward the northeast on a scatter diagram with the price level on the vertical axis and real GDP on the horizontal axis would represent an increase in both price levels and real GDP, which is generally indicative of economic growth. This reflects the general trend of the U.S. economy from 1972 through 2007.

Question 6

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show

Accepted Answer

An inverse relationship between inflation and unemployment is described by the Phillips curve, which suggests that when the economy grows rapidly (high aggregate demand), unemployment tends to decrease but inflation increases, and vice versa. This is because higher demand can lead to more jobs and higher wages, but also to higher prices.

Question 7

An increase in the price of foreign oil can shift the economy's aggregate supply curve _____ resulting in inflation.

Accepted Answer

An increase in the price of foreign oil would increase production costs for firms, causing a decrease in their profitability and a decrease in their willingness to supply goods and services. As a result, the economy's aggregate supply curve would shift inward, leading to a decrease in real output and an increase in prices, which can result in inflation.

Question 8

The unemployment rate for the U.S. economy in 2014 averaged about

Accepted Answer

The unemployment rate for the U.S. economy in 2014 averaged about 6.5 percent. This can be verified through various government and economic data sources.

Question 9

A decrease in AS will trigger less inflation under which of the following conditions?

Accepted Answer

When AD is relatively flat, a decrease in AS will cause a smaller increase in prices because there is excess capacity and firms are unable to raise prices easily. In contrast, when AD is steep, a decrease in AS will cause a larger increase in prices as firms are able to pass on the higher costs to consumers through higher prices.

Question 10

A movement from an upper point to a lower point on the Phillips curve shows

Accepted Answer

A movement from an upper point to a lower point on the Phillips curve signifies a decrease in inflation and an increase in unemployment. This is because as unemployment increases, the competition for jobs increases which reduces the bargaining power of workers and their ability to demand higher wages. As a result, inflation decreases.

Question 11

If AD and AS increase at exactly the same rate, the result will be

Accepted Answer

If both AD and AS increase at the same rate, it means that demand and supply are increasing equally. Therefore, there will not be any significant change in price levels, resulting in stable prices.

Question 12

During the 1960s and early 1970s, economists believed that the Phillips curve indicated

Accepted Answer

The answer of During the 1960s and early 1970s, economists...

Question 13

A decrease in the price of foreign oil will affect the U.S. economy by

Accepted Answer

The answer of A decrease in the price of foreign...

Question 14

The Phillips curve shows the relationship between

Accepted Answer

The Phillips curve shows the inverse relationship between the rate of inflation and the rate of unemployment. As unemployment decreases, inflation tends to increase, and vice versa. This relationship is depicted by a downward sloping curve on a graph, and it is based on the idea that a tight labor market (low unemployment) leads to higher wages and production costs, which are then passed on to consumers in the form of higher prices (inflation). Conversely, a weak labor market (high unemployment) results in lower wages and production costs, leading to lower prices and lower inflation.

Question 15

If AD increases at a faster rate than AS, the result will be

Accepted Answer

When AD (aggregate demand) increases at a faster rate than AS (aggregate supply), it leads to demand-side inflation. This occurs because there is a greater demand for goods and services than there is supply, which causes prices to rise.

Question 16

Which of the following observations concerning the Phillips curve is not true?

Accepted Answer

The Phillips curve is typically downward-sloping, showing the inverse relationship between inflation and unemployment.

Question 17

Aggregate demand grows because

Accepted Answer

Aggregate demand grows due to various reasons such as an increase in government spending, more spending by a growing population, and an increase in the money supply by the Fed. Although patent laws and technological improvements lead to economic growth, they do not directly affect aggregate demand. Therefore, option C is the best answer.

Question 18

A study of the U.S. price level and real GDP from 1972 to 2007 reveals a clear upward march toward higher prices and greater output. What explains this?

Accepted Answer

An upward march toward higher prices and greater output indicates an increase in aggregate demand and aggregate supply over time. This can be caused by various factors such as technological advancements, population growth, government policies, and increased consumer spending. Therefore, both the aggregate demand curve and the aggregate supply curve have shifted to the right year after year.

Question 19

An increase in AD will trigger less inflation under which of the following conditions?

Accepted Answer

When the AS is relatively flat, an increase in AD will cause a relatively small increase in the price level and a larger increase in real output. This is because firms can increase their output without having to increase their costs significantly. Therefore, option D is the best choice.

Question 20

On the vertical axis, the Phillips curve depicts the

Accepted Answer

The Phillips curve shows the relationship between the rate of inflation and the rate of unemployment, with higher inflation typically associated with lower levels of unemployment and vice versa. The vertical axis represents the rate of inflation.

Quiz 33: The Trade-Off Between Inflation and Unemployment