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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.
50. 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.
51. 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.
52. Menu costs help explain
a.
sticky-price theory.
b.
misperceptions theory.
c.
sticky-wage theory.
d.
All of the above are correct.
53. 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.
54. 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.
55. 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.
56. 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
57. 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.
58. 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.
59. 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.
60. 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
61. 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
62. 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.
63. 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.
64. 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.
65. 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.
66. 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.
67. 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.
68. 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.
69. 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.
70. 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
71. 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.
72. 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.
73. 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.
74. 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.
75. 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.
76. 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.
77. Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?
a.
b.
c.
d.
78. 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.
79. 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
80. 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.
81. A decrease in the expected price level shifts
a.
only the long-run aggregate supply curve right.
b.
only the short-run aggregate supply curve right.
c.
both the short-run and the long-run aggregate supply curve right.
d.
Neither the short-run nor the long-run aggregate supply curve right.
82. Which of the following shifts the short-run aggregate supply curve right?
a.
both an increase in the price level that is greater than expected and an increase in the expected price level.
b.
an increase in the price level that is greater than expected, but not an increase in the expected price level.
c.
an increase in the expected price level, but not an increase in the price level that is greater than expected.
d.
neither an increase in the price level that is greater than expected nor an increase in the expected price level.
83. An increase in the expected price level shifts short-run aggregate supply to the
a.
right, and an increase in the actual price level shifts short-run aggregate supply to the right.
b.
right, and an increase in the actual price level does not shift short-run aggregate supply.
c.
left, and an increase in the actual price level shifts short-run aggregate supply to the left.
d.
left, and an increase in the actual price level does not shift short-run aggregate supply.
84. A decrease in the expected price level shifts short-run aggregate supply to the
a.
right, and an increase in the actual price level shifts short-run aggregate supply to the right.
b.
right, and an increase in the actual price level does not shift short-run aggregate supply.
c.
left, and an increase in the actual price level shifts short-run aggregate supply to the left.
d.
left, and an increase in the actual price level does not shift short-run aggregate supply.
85. Which of the following shifts both the short-run and long-run aggregate supply right?
a.
an increase in the actual price level
b.
an increase in the expected price level
c.
an increase in the capital stock
d.
None of the above is correct.
86. Which of the following shifts both short-run and long-run aggregate supply left?
a.
a decrease in the actual price level
b.
a decrease in the expected price level
c.
a decrease in the capital stock
d.
a decrease in the money supply
87. Which of the following shifts short-run, but not long-run aggregate supply right?
a.
a decrease in the actual price level
b.
a decrease in the expected price level
c.
a decrease in the capital stock
d.
an increase in the money supply
88. Which of the following shifts short-run aggregate supply right?
a.
an increase in the minimum wage
b.
an increase in immigration from abroad
c.
an increase in the price of oil
d.
an increase in the actual price level
89. Which of the following shifts short-run aggregate supply left?
a.
an increase in the actual price level
b.
an increase in the expected price level
c.
an increase in the capital stock
d.
None of the above is correct.
90. Which of the following shifts the short-run aggregate supply curve to the right?
a.
an increase in the money supply
b.
an increase in the price level
c.
a decrease in the expected price level
d.
All of the above are correct.
91. Which of the following shifts short-run aggregate supply right?
a.
an increase in the price level
b.
an increase in the minimum wage
c.
a decrease in the price of oil
d.
more people migrate abroad than immigrate from abroad
92. Which of the following shifts the short-run aggregate supply curve to the right?
a.
a decrease in the actual price level
b.
an increase in the actual price level
c.
a decrease in the expected price level
d.
an increase in the expected price level
93. The aggregate demand and aggregate supply model implies monetary neutrality
a.
only in the short run.
b.
only in the long run.
c.
in both the short run and the long run.
d.
in neither the short run nor long run.
94. Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000
billion while economy B has had a money supply of $500 billion. It follows that
a.
real GDP and the price level are lower in country B.
b.
real GDP, but not the price level, is lower in country B.
c.
the price level, but not real GDP is lower in country B.
d.
neither the price level or real GDP is lower in country B.
95. Which of the following shifts long-run aggregate supply left?
a.
a decrease in either natural resources or the human capital stock.
b.
a decrease in the human capital stock, but not natural resources.
c.
a decrease in natural resources, but not the human capital stock.
d.
neither a decrease in natural resources nor the human capital stock.
96. Which of the following, other things the same, would make the price level increase and real GDP decrease?
a.
long-run aggregate supply shifts left.
b.
long-run aggregate supply shifts right.
c.
aggregate demand shifts right.
d.
aggregate demand shifts left.
97. The misperceptions theory of short-run aggregate supply curve says that quantity of output will decrease if the price
level
a.
decreases by more than expected so that firms believe the relative price of their output has decreased.
b.
decreases by more than expected so that firms believe the relative price of their output has increased.
c.
decreases by less than expected so that firms believe the relative price of their output has decreased.
d.
decreases by less than expected so that firms believe the relative price of their output has increased.
98. In the long run, an economy's production of goods and services depends on its supply of
a.
labor, natural resources, capital, and available technology.
b.
labor, natural resources, and capital only.
c.
labor, and natural resources only.
d.
labor only.
