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Chapter 18 - Extending the Analysis of Aggregate Supply
45. Refer to the graphs above. Assume that the economy is initially at equilibrium where AD2
and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph
2. A movement from point C to point B in graph 2 would most likely be associated in graph 1
with a shift of:
46. Refer to the graphs above. Assume that the economy is initially at equilibrium where AD2
and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph
2. If the government implements contractionary or restrictive policy, it would make the
economy in graph 2 to:
Chapter 18 - Extending the Analysis of Aggregate Supply
47. Refer to the above graphs. Assume that the economy starts out at point D in Graph 2,
whereas full employment would be attained at point C. The Phillips curve shown suggests that
full employment:
48. The inflation and unemployment data for the 1961 to 1969 period showed that as the rate
of unemployment:
49. Given a Phillips Curve with stable and predictable inflation and unemployment rate
tradeoffs, it appears that:
50. The inflation and unemployment data for the 1970s suggest that the:
51. Adverse aggregate-supply shocks or stagflation would cause a:
52. A rightward shift of the Phillips Curve suggests that:
Chapter 18 - Extending the Analysis of Aggregate Supply
53. Stagflation can be described as a:
54. Which event probably contributed to the stagflation of the 1970s?
55. Adverse aggregate supply shocks would result in:
Chapter 18 - Extending the Analysis of Aggregate Supply
56. A potential cause of stagflation is:
57. Which factor contributed to the demise of stagflation during the 1982-1989 period?
58. Stagflation's demise during the 1980s resulted in a:
Chapter 18 - Extending the Analysis of Aggregate Supply
59. The misery index is a measure of national economic discomfort that adds together a
nation's:
60. Consider the following national data: tax revenues as a percent of GDP: 25 percent;
government spending as a percent of GDP: 31 percent; unemployment rate: 9 percent;
inflation rate: 6 percent. What is the misery index for this nation?
Chapter 18 - Extending the Analysis of Aggregate Supply
61. Refer to the above graph. Assume the economy is at the initial position of B2. An increase
in aggregate demand with no corresponding change in inflation expectations and wage rates
will tend to:
62. Refer to the above graph. Assume the economy is at the initial position of B2. An increase
in aggregate demand with a corresponding adjustment in inflation expectations and wages
will tend to:
63. Refer to the above graph. Assume the economy is at the initial position of B2. It is possible
for the government to reduce the unemployment rate and move the economy to C2 if:
Chapter 18 - Extending the Analysis of Aggregate Supply
64. Refer to the above graph. The long-run relationship between the rate of inflation and the
unemployment rate is represented by:
65. Refer to the above graph. What events would tend to temporarily move the economy from
point B2 to C2?
66. Refer to the above graph. The economy is at point B2, and aggregate demand increases. In
the short run, the economy will:
Chapter 18 - Extending the Analysis of Aggregate Supply
67. The automatic adjustment mechanism that makes the economy move towards the long-run
Phillips Curve is:
68. The long-run Phillips Curve is vertical at:
69. In the short run, if the actual rate of inflation is lower than the expected rate, then:
Chapter 18 - Extending the Analysis of Aggregate Supply
70. The short-run Phillips Curve assumes an unchanging:
71. If the expected rate of inflation rises, then the short-run Phillips Curve would:
72. When the rate of inflation is decreasing, this economic condition is called:
Chapter 18 - Extending the Analysis of Aggregate Supply
73. Based on the Phillips Curve, when the actual rate of inflation is greater than the expected
rate, the unemployment rate will:
74. Disinflation can be explained by the Phillips Curve analysis as resulting from a situation
where the actual rate of inflation is initially less than the expected rate, causing the
unemployment rate to:
Chapter 18 - Extending the Analysis of Aggregate Supply
75. The short-run Phillips Curve intersects the long-run Phillips Curve at the:
76. Assume contracts between workers and employers that call for an increase in the wage
rate of 5 percent are based on an expected inflation rate of 3 percent. Should inflation actually
be 6 percent, then:
77. The analysis of the short-run and long-run Phillips Curve suggests that an increase in
aggregate demand:
Chapter 18 - Extending the Analysis of Aggregate Supply
78. Refer to the above table. Calculating the annual inflation rate would indicate that this
economy is experiencing:
79. Refer to the above table. What would be the inflation rate from Years 1-2, Years 2-3, and
Years 3-4, respectively?
Chapter 18 - Extending the Analysis of Aggregate Supply
80. Which is a basic proposition of supply-side economics?
81. Supply-side economists contend that the system of taxation in the United States:
82. Supply-side policies can be described in terms of the aggregate demand and aggregate
supply model as an attempt to shift:
Chapter 18 - Extending the Analysis of Aggregate Supply
83. A Congressional representative who calls for a decrease in tax rates to increase saving,
work effort, and economic growth would most likely be advocating:
84. In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes
cutting taxes as a means of improving incentives to work, save, and invest would be
characterized primarily as a:
85. Which action will tend to decrease aggregate supply according to supply-side
economists?
Chapter 18 - Extending the Analysis of Aggregate Supply
86. Assume that a person saves $50,000 and earns 7 percent annual interest. If the marginal
tax rate is 36 percent, then the after-tax interest earning will be:
87. Assume that a person earns $600 per day at a certain job. If the marginal tax rate is cut
from 40% to 30%, then this person's after-tax daily earnings will:
88. One central idea in supply-side economics concerning budget deficits is illustrated by the:
