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Chapter 18 - Extending the Analysis of Aggregate Supply
1. In the short run, the price level is assumed to be:
2. In the short run, nominal wages and other input prices are assumed to be:
Chapter 18 - Extending the Analysis of Aggregate Supply
3. The economy enters the long-run once:
4. Assume that initially your nominal wage was $16 an hour and the price index was 100. If
the price level increases to 105, then your:
5. In the short run, if the price level increases, then nominal wages:
Chapter 18 - Extending the Analysis of Aggregate Supply
6. The short-run aggregate supply curve illustrates the idea that if the price level falls, firms
will experience:
7. In the long run, if the price level increases, then nominal wages and other input prices:
8. In the long run, if the price level decreases, then the economy's output level will:
Chapter 18 - Extending the Analysis of Aggregate Supply
9. Refer to the graphs above. Graph A is constructed on the basic assumption that:
10. Refer to the graphs above. In Graph A, an increase in the price level from P1 to P2 will
cause:
Chapter 18 - Extending the Analysis of Aggregate Supply
11. Refer to the graphs above. In Graph A, a decrease in the price level from P1 to P3 will lead
to:
12. Refer to the graphs above. In Graph B, assume that the economy is initially in equilibrium
at point x1 and that there is an increase in the price level from P1 to P2. In the long run, this
change will lead to:
13. Refer to the graphs above. In Graph B, assume that the economy is initially in equilibrium
at point x1 and that there is an increase in the price level from P1 to P2. This change will lead
to:
Chapter 18 - Extending the Analysis of Aggregate Supply
14. The short-run aggregate supply curve:
15. The short-run aggregate supply curve intersects the long-run aggregate supply curve at:
16. Equilibrium in the long run occurs when:
Chapter 18 - Extending the Analysis of Aggregate Supply
17. Inflation in the short run is most likely to result from a(n):
18. Demand-pull inflation in the short-run raises the price level and the:
19. In the long run, demand-pull inflation:
Chapter 18 - Extending the Analysis of Aggregate Supply
20. In the long run, demand-pull inflation leads to:
21. With demand-pull inflation in the extended AD-AS model, there is:
22. In the short-run, demand-pull inflation increases:
Chapter 18 - Extending the Analysis of Aggregate Supply
23. In the cost-push model of inflation, increases in nominal-wage rates that exceed increases
in the productivity of labor:
24. If the government uses stimulative monetary or fiscal policies to counter the effects of
cost-push inflation, then the economy is likely to experience:
25. If the government adopts a "hands off" approach to cost-push inflation in the economy,
then in the short run there is likely to be:
Chapter 18 - Extending the Analysis of Aggregate Supply
26. If cost-push inflation occurs and the government adopts a "hands-off" policy approach,
then according to the simple extended AD-AS model, in the long run the economy will:
27. What will occur in the short run if there is cost-push inflation and the government adopts a
hands-off approach to it?
Chapter 18 - Extending the Analysis of Aggregate Supply
28. Refer to the above graph. Suppose that the economy is at an initial equilibrium where the
AD1 and AS1 curves intersect. Demand-pull inflation in the short run can best be represented
as a shift of:
Chapter 18 - Extending the Analysis of Aggregate Supply
29. Refer to the above graph. Suppose that the economy is at an initial equilibrium where the
AD1 and AS1 curves intersect. Demand-pull inflation in the long run can best be illustrated as
a shift of:
30. Refer to the above graph. Stagflation in the short run is best represented as resulting from
a shift of:
Chapter 18 - Extending the Analysis of Aggregate Supply
31. Refer to the above graph. Suppose that the economy is at an initial equilibrium where the
AD1 and AS1 curves intersect. If cost-push inflation occurs and the subsequently government
implements expansionary policy, then the effect of such policy is to shift:
32. Refer to the above graph. Suppose that the economy is at an initial equilibrium where the
AD1 and AS1 curves intersect. If cost-push inflation occurs and the government adopts a
"hands-off" policy approach, then in the long run the price level will be at:
Chapter 18 - Extending the Analysis of Aggregate Supply
33. Refer to the above graph. Assume that the economy is initially at equilibrium at point A.
If AD increases, then the long run equilibrium point will be at point:
Chapter 18 - Extending the Analysis of Aggregate Supply
34. Refer to the above graph. Assume that the economy is initially at equilibrium at point A. If
there is cost-push inflation in this economy and then the government pursues an expansionary
fiscal policy, in the long run the:
35. If prices and wages are flexible, a recession resulting from a decrease in aggregate
demand will in the long run cause a(n):
Chapter 18 - Extending the Analysis of Aggregate Supply
36. Refer to the above graph. Assume that the economy is initially at equilibrium at point A. If
there is a recession in the economy because AD1 shifts to AD2, and wages and prices are
flexible, then in the long run the price level will be:
Chapter 18 - Extending the Analysis of Aggregate Supply
37. Refer to the above graph. If Qf is potential GDP, wages and prices are flexible, then the
long-run aggregate supply curve will be:
38. Refer to the above graph. Assume that the economy is initially at equilibrium at point C,
and that the government has adopted a "hands-off" policy approach. If demand-pull inflation
occurs, then the final long-run equilibrium point will be point __; while if cost-push inflation
occurs (starting at point C), then the final long-run equilibrium point will be point
_________:
Chapter 18 - Extending the Analysis of Aggregate Supply
39. Refer to the above graph. Economic growth driven by productivity and technology would
be illustrated as a shift of:
40. Refer to the above graph. An expansion of the economy's production possibilities can, by
itself:
Chapter 18 - Extending the Analysis of Aggregate Supply
41. Refer to the above graph. Ongoing inflation would occur if the Fed:
42. The traditional Phillips Curve shows the:
43. The traditional Phillips Curve showing a tradeoff between inflation and unemployment is
based on having a stable:
Chapter 18 - Extending the Analysis of Aggregate Supply
44. If the economy is operating in the intermediate range of the aggregate supply curve, then
the greater the rate of growth of aggregate demand the:
