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D) 140.
E) 150.
Answer: B
Topic: Equilibrium AD and AS
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
27) The table above gives data for the nation of Pearl, a small island in the South Paciic. If
a supply shock decreases the quantity of real GDP supplied by $6 billion at each price level,
the new equilibrium real GDP is
A) $16 billion.
B) $19 billion.
C) $22 billion.
D) $23 billion.
E) $17 billion.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
28) The table above gives data for the nation of Pearl, a small island in the South Paciic. If
aggregate demand increases so that the quantity of real GDP demanded is $6 billion more
at each price level, the new equilibrium real GDP is
A) $34 billion.
B) $31 billion.
C) $28 billion.
D) $25 billion.
E) $23 billion.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
61
29) The table above gives data for the nation of Pearl, a small island in the South Paciic. If
aggregate demand increases so that the quantity of real GDP demanded is $6 billion more
at each price level, the new equilibrium real GDP is ________, and the nation is now
experiencing a(n) ________.
A) $22 billion; inlationary gap
B) $22 billion; recessionary gap
C) $28 billion; inlationary gap
D) $28 billion; recessionary gap
E) $25 billion; equilibrium
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: New
AACSB: Analytical thinking
30) According to the igure above, which point or points correspond to full employment?
A) only point a
B) only point b
C) only point c
D) points a and b
E) points a, b, and c
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
62
31) In the igure above, the economy is at an equilibrium with real GDP of $16 trillion and a
price level of 110. At this point there is
A) an inlationary gap.
B) a recessionary gap.
C) price stability.
D) a full-employment equilibrium.
E) an above full-employment equilibrium.
Skill: Level 1: Deinition
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
32) In the igure above, the economy is at an equilibrium with real GDP of $16 trillion and a
price level of 110. As the economy moves toward its ultimate equilibrium, the ________
curve shifts ________.
A) aggregate supply; leftward
B) aggregate supply; rightward
C) aggregate demand; rightward
D) aggregate demand; leftward
E) potential GDP; leftward
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
63
33) In the igure above, the economy is at an equilibrium with real GDP of $16 trillion and a
price level of 110. As the economy moves toward its ultimate equilibrium, the ________
curve shifts ________ because ________.
A) aggregate supply; leftward; the money wage rate rises
B) aggregate supply; rightward; the money wage rate falls
C) aggregate demand; rightward; the money wage rate falls
D) aggregate demand; leftward; the money wage rate rises
E) potential GDP; leftward; the money wage rate falls
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: New
AACSB: Analytical thinking
34) An economy experiences a recessionary gap. As the economy adjusts to full
employment, the money wage rate
A) falls, shifting the aggregate supply curve rightward.
B) rises, shifting the aggregate supply curve leftward.
C) rises, shifting the aggregate demand curve rightward.
D) falls, shifting the aggregate demand curve leftward.
E) falls, increasing potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
35) If the economy is above full employment, there is ________ gap, and as the economy
adjusts toward full employment, the price level ________.
A) an inlationary; rises
B) an inlationary; falls
C) a recessionary; rises
D) a recessionary; falls
E) an inlationary; does not change
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
64
36) Which of the following can start an inlation?
A) an increase in aggregate demand
B) an increase in aggregate supply
C) a decrease in aggregate supply
D) Both answers A and C are correct.
E) Answers A, B, and C are correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
37) Inlation can be started by
A) a decrease in aggregate supply or a decrease in aggregate demand.
B) a decrease in aggregate supply or an increase in aggregate demand.
C) an increase in aggregate supply or an increase in aggregate demand.
D) an increase in aggregate supply or a decrease in aggregate demand.
E) an increase in aggregate demand or an increase in potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
38) Demand-pull inlation starts with
A) an increase in aggregate demand.
B) a decrease in aggregate demand.
C) an increase in potential GDP.
D) an increase in aggregate supply.
E) a decrease in aggregate supply.
Skill: Level 1: Deinition
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
65
39) Demand-pull inlation starts with a shift of the
A) AS curve rightward.
B) AD curve rightward.
C) AS curve leftward.
D) AD curve leftward.
E) potential GDP line leftward.
Skill: Level 1: Deinition
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
40) Demand pull inlation can be started by
A) a decrease in the quantity of money.
B) an increase in government expenditure.
C) a decrease in net exports.
D) an increase in the price of oil.
E) a decrease in the money price of resources.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
41) Which of the following factors could start a demand-pull inlation?
A) an increase in tax rates
B) a decrease in government expenditure
C) a decrease in the money wage rate
D) an increase in the money wage rate
E) an increase in the quantity of money
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
66
42) Increases in the quantity of money can start a ________ inlation and an increase in
government expenditure can start a ________ inlation.
A) demand-pull; demand-pull
B) demand-pull; cost-push
C) cost-push; cost-push
D) cost-push; demand-pull
E) None of the above is correct because increases in the quantity of money are necessary
to continue an inlation but cannot start an inlation.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
43) Initially, demand-pull inlation will
A) increase the price level and not change real GDP.
B) increase both the price level and increase real GDP.
C) increase the price level and decrease real GDP.
D) shift the aggregate supply curve rightward.
E) decrease potential GDP.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
44) A demand-pull inlation initially is characterized by
A) increasing real output and a labor shortage.
B) increasing real output and a labor surplus.
C) decreasing real output and a labor shortage.
D) decreasing real output and a labor surplus.
E) no change in real output and a labor shortage.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
67
45) If demand pull inlation occurs when the economy is already at potential GDP, then
following the initial increase in aggregate demand, the
A) AS curve shifts rightward.
B) potential GDP line shifts rightward.
C) AS curve shifts leftward.
D) potential GDP line shifts leftward.
E) None of the above is correct because demand-pull inlation shifts only the aggregate
demand curve.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
46) Compared to the initial equilibrium, an initial increase in aggregate demand that is
NOT followed by an increase in the quantity of money results in new long-run equilibrium
with
A) a higher price level but the same real GDP.
B) a higher price level and an increased level of real GDP.
C) the same price level and a lower level of real GDP.
D) the same price level and the same real GDP.
E) None of the above answers is correct.
Skill: Level 4: Applying models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
47) A demand-pull inlation consists of ________ shifts in the AD curve and ________ shifts in
the AS curve.
A) rightward; rightward
B) rightward; leftward
C) right; no
D) leftward; rightward
E) leftward; leftward
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
68
48) In a persisting demand-pull inlation
A) aggregate supply decreases and aggregate demand increases.
B) aggregate demand decreases and aggregate supply decreases.
C) aggregate demand increases and potential GDP decreases.
D) aggregate supply increases and aggregate demand increases.
E) None of the above answers is correct.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
49) Demand-pull inlation results from continually increasing the quantity of money, which
leads to continually
A) decreasing potential GDP.
B) increasing potential GDP.
C) increasing aggregate supply.
D) decreasing aggregate demand.
E) increasing aggregate demand.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
50) Demand-pull inlation persists because of
A) continuing increases in government expenditures.
B) continuing increases in the quantity of money.
C) continuing increases in the real wage rate.
D) continuing decreases in the money wage rate.
E) continuing increases in aggregate supply.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
69
51) For a demand-pull inlation to persist requires persistent increases in
A) tax rates.
B) the real wage rate.
C) real GDP.
D) the quantity of money.
E) government expenditures.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
52) During a demand-pull inlation, if the Fed tries to maintain a level of real GDP above
potential GDP, the AD curve will ________ and the AS curve will ________.
A) shift rightward once; shift rightward continuously
B) shift rightward continuously; shift rightward continuously
C) shift rightward continuously; not shift
D) not shift; shift rightward continuously
E) shift rightward continuously; shift leftward continuously
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Analytical thinking
53) In a demand-pull inlation, money wage rates rise because
A) a decrease in aggregate demand creates a labor shortage.
B) an increase in aggregate demand creates a labor surplus.
C) an increase in aggregate demand creates a labor shortage.
D) a decrease in aggregate demand creates a labor surplus.
E) an increase in aggregate supply creates a labor shortage.
Skill: Level 3: Using models
Section: Checkpoint 13.3
Status: Old
AACSB: Relective thinking
70
