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133. Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve?
a.
The price level rises, the real wage falls, and the quantity demanded of labor declines.
b.
The price level falls, the real wage rises, and the quantity demanded of labor falls.
c.
The price level rises, the real wage rises, and the quantity demanded of labor falls.
d.
The nominal wage rises, the real wage rises, and the quantity demanded and supplied of labor rise.
e.
a and b
134. The short-run aggregate supply curve is ________ and the long-run aggregate supply curve is _________.
a.
upward sloping; horizontal
b.
vertical; upward sloping
c.
vertical; horizontal
d.
upward sloping; vertical
e.
none of the above
135. Which of the following statements is false?
a.
Some prices in an economy adjust faster than other prices.
b.
Aggregate demand curves slope downward.
c.
Firms may not adjust their prices immediately because they may be unable to figure out whether a decline in
demand is temporary or permanent.
d.
The absolute price of a good is the dollar or money price of the good.
e.
none of the above
136. The nominal wage is $40 an hour and the price level as measured by a price index is 2.00. If the nominal wage falls
to $30 and the price index declines to 1.50, according to the worker misperception explanation of the upward-sloping
SRAS curve, workers will initially perceive the
a.
real wage as something greater than $20.
b.
real wage as something less than $20.
c.
real wage as $20.
d.
nominal wage as something more than $30.
e.
nominal wage as something less than $30.
137. A change in Real GDP in the short run can be brought about by a change in
a.
the exchange rate.
b.
labor productivity.
c.
expectations of future sales.
d.
wealth.
e.
all of the above
138. The wage rate rises. As a result, in the short run Real GDP will __________ and the price level will __________.
a.
rise; rise
b.
fall; fall
c.
remain constant; fall
d.
fall; rise
e.
rise; fall
139. The economy suffers an adverse supply shock. As a result, in the short run Real GDP will __________ and the price
level will __________.
a.
rise; rise
b.
fall; fall
c.
fall; remain constant
d.
fall; rise
e.
rise; fall
140. The worker-misperception explanation of the SRAS curve is used to explain why
a.
SRAS curves shift to the right
b.
SRAS curves shift to the left
c.
the AD curve cannot change the price level if the SRAS curve is operational.
d.
the SRAS curve slopes downward.
e.
none of the above
141. There is a rise in labor productivity in the economy. As a result, in the short run Real GDP __________ and the price
level __________.
a.
rises; falls
b.
falls; rises
c.
falls; falls
d.
rises; rises
e.
remains constant; remains constant
142. A change in labor productivity shifts the __________ curve and a change in the exchange rate shifts the __________
curve.
a.
SRAS; SRAS
b.
AD; AD
c.
SRAS; AD
d.
AD; SRAS
e.
none of the above
143. Suppose the following: (1) the wage rate rises, (2) the interest rate rises, (3) any change in AD is greater than any
change in SRAS. Based on this information, in the short run Real GDP will __________ and the price level will
__________.
a.
rise; rise
b.
fall; rise
c.
fall; fall
d.
rise; fall
144. Suppose the following: (1) the wage rate falls, (2) business taxes decline, (3) any change in SRAS is greater than any
change in AD. Based on this information, in the short run Real GDP will __________ and the price level will
__________.
a.
rise; rise
b.
fall; rise
c.
fall; fall
d.
rise; fall
e.
none of the above
145. __________ identifies the level of Real GDP the economy produces when all economywide adjustments have taken
place and there are no misperceptions on the part of workers.
a.
Short-run equilibrium
b.
Disequilibrium
c.
Long-run equilibrium
d.
Equilibrium
e.
none of the above
146. In short-run equilibrium, it is always true that
a.
quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP.
b.
quantity demanded of Real GDP > quantity supplied of Real GDP.
c.
quantity demanded of Real GDP = quantity supplied of Real GDP.
d.
a and b
e.
There is not enough information to answer the question.
Exhibit 8-1
147. Refer to Exhibit 8-1. If we assume that the unemployment rate and Real GDP are inversely related, which of the
points on this graph is most likely representative of the lowest unemployment rate?
a.
A
b.
B
c.
C
d.
D
148. Refer to Exhibit 8-1. If we assume that Real GDP and the unemployment rate are inversely related, which of the
points on this graph is most likely representative of the highest unemployment rate?
a.
A
b.
B
c.
C
d.
D
149. Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If businesses become more
optimistic about future sales, at which point is the economy most likely to end up in the short run?
a.
A
b.
B
c.
C
d.
D
150. Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If foreign real national
income rises, at which point is the economy most likely to end up in the short run?
a.
A
b.
B
c.
C
d.
D
e.
A change in foreign real national income would have no impact on the domestic economy.
151. Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If wage rates rise, at which point
is the economy most likely to end up in the short run?
a.
A
b.
B
c.
C
d.
D
152. Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If the price of oil rises, at which
point is the economy most likely to end up in the short run?
a.
A
b.
B
c.
C
d.
D
153. Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If unusually bad weather leads to
decreased production of wheat, corn, and other crops, at which point is the economy most likely to end up in the short
run?
a.
A
b.
B
c.
C
d.
D
154. Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point B. If businesses become
pessimistic about future sales, at which point is the economy most likely to end up in the short run?
a.
A
b.
B
c.
C
d.
D
Exhibit 8-2
Given Change in Economic Factor
Real GDP
Price Level
Increase in foreign real national income
(1)
(2)
Decrease in wage rates
(3)
(4)
Beneficial supply shock
(5)
(6)
Decrease in government purchases
(7)
(8)
Increase in personal income taxes
(9)
(10)
Decrease in labor productivity
(11)
(12)
155. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (1) and blank (2),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
156. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (3) and blank (4),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
157. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (5) and blank (6),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
158. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (7) and blank (8),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
159. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (9) and blank (10),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
160. Refer to Exhibit 8-2. Based on the given change, what word (rises or falls) should go in blank (11) and blank (12),
respectively, to summarize the resulting impact on short run equilibrium?
a.
rises; rises
b.
falls; falls
c.
rises; falls
d.
falls; rises
161. Velocity is the average number of times a dollar is spent to buy
a.
final goods and services in a year.
b.
final and intermediate goods and services in a year.
c.
final goods, but not services, in a year.
d.
services in a year.
162. The product of ____________________ and _________________ is equal to the total amount of spending in an
economy.
a.
the money supply; the price level
b.
velocity; the price level
c.
the money supply; velocity
d.
velocity; the level of output
163. Suppose that C = $700, I = $200, G = $200, NX = $100, and that the money supply is equal to $400. Based upon
these assumptions, velocity is equal to ________________. If consumption and velocity both rise beyond their initial
levels, then it follows that another component of spending ___________ necessarily fall.
a.
3; must
b.
3; does not
c.
4; must
d.
4; does not
164. If velocity and the money supply are __________________, then when one component of spending rises another
component of spending ________________.
a.
constant; must fall
b.
constant; must rise
c.
rising; may not necessarily fall
d.
rising; must rise
165. As the U.S. dollar appreciates against foreign currencies, the U.S. ____________ curve shifts _____________
resulting in a(n) _________________ in the U.S. price level and a(n) _________________ in Real GDP in the United
States.
a.
AD; leftward; decrease; decrease
b.
AD; rightward; increase; increase
c.
SRAS; rightward; decrease; increase
d.
SRAS; leftward; increase; decrease
166. After an adverse supply shock occurs, the ____________ curve shifts _____________ resulting in a(n)
_________________ in the price level and a(n) ________________ in Real GDP.
a.
AD; leftward; decrease; decrease
b.
AD; rightward; increase; increase
c.
SRAS; rightward; decrease; increase
d.
SRAS; leftward; increase; decrease
167. As interest rates rise, the ____________ curve shifts _____________ resulting in a(n) _________________ in the
price level and a(n) ________________ in Real GDP.
a.
AD; leftward; decrease; decrease
b.
AD; rightward; increase; increase
c.
SRAS; rightward; decrease; increase
d.
SRAS; leftward; increase; decrease
168. If foreign real national income rises, the U.S. ____________ curve shifts _____________. When labor productivity
increases the _____________ curve shifts _______________. If both of these situations occur simultaneously, the
combined result would be a(n) ______________ the price level and a(n) __________________ Real GDP in the United
States.
a.
AD; leftward; SRAS; rightward; decrease in; indeterminant impact on
b.
AD; rightward; SRAS; leftward; increase in; indeterminant impact on
c.
SRAS; leftward; SRAS rightward; indeterminant impact on; indeterminat impact on
d.
AD; rightward; SRAS; rightward; indeterminant impact on; increase in
Exhibit 8-3
