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Chapter 18 - Extending the Analysis of Aggregate Supply
1. In terms of aggregate supply, a period in which nominal wages and other resource prices
are unresponsive to price-level changes is called the:
2. In terms of aggregate supply, a period in which nominal wages and other resource prices
are fully responsive to price-level changes is called the:
Chapter 18 - Extending the Analysis of Aggregate Supply
3. In the extended analysis of aggregate supply, the short-run aggregate supply curve is:
4. In terms of aggregate supply, the short run is a period in which:
5. In terms of aggregate supply, the difference between the long run and the short run is that in
the long run:
Chapter 18 - Extending the Analysis of Aggregate Supply
6. The long-run aggregate supply curve is vertical:
7. The short-run aggregate supply curve is upsloping because higher price levels:
8. Other things equal, a decrease in the price level will:
Chapter 18 - Extending the Analysis of Aggregate Supply
Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the
price level (P) initially is 100, and that prices and wages are flexible both upward and
downward. Use the following short-run aggregate supply schedules to answer the question.
9. Refer to the information above. If the price level unexpectedly increases from 100 to 125,
the level of real output in the short run will:
10. Refer to the information above. In the long run, an increase in the price level from 100 to
125 will:
Chapter 18 - Extending the Analysis of Aggregate Supply
11. Refer to the information above. If the price level unexpectedly declines from 100 to 75,
the level of real output in the short run will:
12. Refer to the information above. In the long run, a fall in the price level from 100 to 75
will:
13. Which of the following statements is true?
Chapter 18 - Extending the Analysis of Aggregate Supply
14. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf In the short run, an increase in the price level from P2 to P3 will:
Chapter 18 - Extending the Analysis of Aggregate Supply
15. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf In the long run, an increase in the price level from P2 to P3 will:
16. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf.In terms of this diagram, the long-run aggregate supply curve:
Chapter 18 - Extending the Analysis of Aggregate Supply
17. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf. In the short run, demand-pull inflation could best be shown as:
18. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf. In the long run, demand-pull inflation could best be shown as:
Chapter 18 - Extending the Analysis of Aggregate Supply
19. Refer to the above diagram. Assume that nominal wages initially are set on the basis of
the price level P2 and that the economy initially is operating at its full-employment level of
output Qf. In the short run, cost-push inflation could best be shown as:
20. Other things equal, the short-run aggregate supply curve shifts positions when:
Chapter 18 - Extending the Analysis of Aggregate Supply
21. Refer to the above diagram relating to short-run and long-run aggregate supply. The
Chapter 18 - Extending the Analysis of Aggregate Supply
22. Refer to the above diagram. If the price level rises above P1 because of an increase in
aggregate demand, the:
23. Refer to the above diagram. The long-run aggregate supply curve is:
Chapter 18 - Extending the Analysis of Aggregate Supply
24. Refer to the above diagram and assume the economy is operating at equilibrium point w.
In the short run, an increase in the price level from P2 to P3 would move the economy from
point w to point:
25. Refer to the above diagram and assume the economy is operating at equilibrium point w.
In the long run, an increase in the price level from P2 to P3 would move the economy from
point w to point:
Chapter 18 - Extending the Analysis of Aggregate Supply
18-13
26. Refer to the above diagram and assume the economy is operating at equilibrium point w.
In the short run, a decrease in the price level from P2 to P1 would move the economy from
point w to point:
27. Refer to the above diagram and assume the economy is operating at equilibrium point w.
If wages and other resource prices are flexible downward, in the long run a decrease in the
price level from P2 to P1 would move the economy from point w to point:
28. Refer to the above diagram. If drawn, the long-run aggregate supply curve would include
points:
Chapter 18 - Extending the Analysis of Aggregate Supply
29. The level of potential output and location of the long-run aggregate supply curve are
determined by:
30. The natural rate of unemployment:
31. In the extended aggregate demand-aggregate supply model:
Chapter 18 - Extending the Analysis of Aggregate Supply
32. In the extended aggregate demand-aggregate supply model:
Chapter 18 - Extending the Analysis of Aggregate Supply
33. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. Demand-pull inflation in the short run is best shown as:
34. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. In the long run, demand-pull inflation is best shown as:
Chapter 18 - Extending the Analysis of Aggregate Supply
35. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the
diagram because:
36. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. Cost-push inflation in the short run is best represented as a:
Chapter 18 - Extending the Analysis of Aggregate Supply
37. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. Assuming no change in aggregate demand, the long-run
response to a recession caused by cost-push inflation is best depicted as a:
38. Refer to the above diagram. The initial aggregate demand curve is AD1 and the initial
aggregate supply curve is AS1. If government offsets the decline in real output resulting from
short-run cost-push inflation by increasing aggregate demand from AD1 to AD2:
Chapter 18 - Extending the Analysis of Aggregate Supply
39. If government uses fiscal policy to restrain cost-push inflation, we can expect:
40. One policy dilemma posed by cost-push inflation is that:
41. If government uses its stabilization policies to maintain full employment under conditions
of cost-push inflation:
Chapter 18 - Extending the Analysis of Aggregate Supply
42. Refer to the above diagram and assume that prices and wages are flexible both upward
and downward in the economy. In the extended AD-AS model:
