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Stagflation refers to


A) an increase in inflation accompanied by decreases in real output and employment.
B) a decline in the price level accompanied by increases in real output and employment.
C) a simultaneous increase in real output and the price level.
D) a simultaneous reduction in real output and the price level.

E) A) and B)
F) A) and C)

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Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the Accompanying short-run aggregate supply schedules. In the long run, a fall in the price level from 100 to 75 will A) decrease real output from $500 to $440. B) increase real output from $500 to $620. C) change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. D) change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500. Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the Accompanying short-run aggregate supply schedules. In the long run, a fall in the price level from 100 to 75 will


A) decrease real output from $500 to $440.
B) increase real output from $500 to $620.
C) change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500.
D) change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.

E) All of the above
F) A) and D)

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What is stagflation, and what was one of its causes in the 1970s?

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Stagflation is inflation accompanied by st...

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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


A) long run.
B) short run.
C) immediate market period.
D) very long run.

E) None of the above
F) All of the above

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In terms of aggregate supply, the short run is a period in which


A) the price level is constant.
B) employment is constant.
C) real output is constant.
D) nominal wages and other resource prices are unresponsive to price-level changes.

E) B) and D)
F) A) and D)

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Refer to the diagram. If drawn, the long-run aggregate supply curve would include points A) v, w, and u. B) y, w, and u. C) t, w, and z. D) y, w, and x. Refer to the diagram. If drawn, the long-run aggregate supply curve would include points


A) v, w, and u.
B) y, w, and u.
C) t, w, and z.
D) y, w, and x.

E) B) and C)
F) None of the above

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A) change aggregate supply from A \mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 3 } B) increase real output from Q _ { 1 } \text { to } Q _ { 2 } \text {. } C) change aggregate supply from A \mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 } \text {. } D) increase real output from Q _ { f } \text { to } Q _ { 2 }


A) change aggregate supply from A AS2 to AS3\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 3 }
B) increase real output from Q1 to Q2. Q _ { 1 } \text { to } Q _ { 2 } \text {. }
C) change aggregate supply from A AS2 to AS1. \mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 } \text {. }
D) increase real output from Qf to Q2Q _ { f } \text { to } Q _ { 2 }

E) A) and C)
F) B) and C)

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In the absence of unexpected shocks, the economy will tend to experience


A) positive, noninflationary growth.
B) no changes in output or prices.
C) positive growth with mild amounts of deflation.
D) positive growth with mild amounts of inflation.

E) None of the above
F) B) and C)

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Since the Great Recession of 2007-2009


A) the misery index has increased.
B) the misery index has remained stable.
C) the movement of the unemployment rate and inflation rate has been inconsistent with a stable Phillips Curve.
D) the movement of the unemployment rate and inflation rate has been consistent with a stable Phillips Curve.

E) A) and B)
F) B) and C)

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Supply-side economists recommend higher marginal tax rates to increase aggregate supply and real output.

A) True
B) False

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The given curve is known as the A) Taylor rule. B) Okun Curve. C) Laffer Curve. D) Phillips Curve. The given curve is known as the


A) Taylor rule.
B) Okun Curve.
C) Laffer Curve.
D) Phillips Curve.

E) B) and D)
F) A) and B)

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One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches.

A) True
B) False

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The Laffer Curve is a central concept in


A) monetarism.
B) Keynesianism.
C) welfare economics.
D) supply-side economics.

E) None of the above
F) All of the above

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Which of the following is a tenet of supply-side economics?


A) High marginal tax rates severely discourage work, saving, and investment.
B) Increases in Social Security taxes and other business taxes shift the aggregate supply curve to the right.
C) The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
D) Transfer payments increase incentives to work.

E) A) and B)
F) A) and C)

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In the cost-push model of inflation, increases in nominal-wage rates that exceed increases in the productivity of labor


A) increase aggregate supply and the price level in the economy.
B) increase aggregate supply and decrease the price level in the economy.
C) decrease aggregate supply and the price level in the economy.
D) decrease aggregate supply and increase the price level in the economy.

E) All of the above
F) A) and B)

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Refer to the diagram and assume the economy is operating at equilibrium point w. In the short run, an increase in the price level from P _ { 2 } \text { to } P _ { 3 } would move the economy from point w to point A) v. B) x. C) u. D) z. Refer to the diagram and assume the economy is operating at equilibrium point w. In the short run, an increase in the price level from P2 to P3P _ { 2 } \text { to } P _ { 3 } would move the economy from point w to point


A) v.
B) x.
C) u.
D) z.

E) C) and D)
F) A) and B)

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Supply-side economists contend that the system of taxation in the United States


A) creates incentives to save and invest.
B) creates disincentives to work.
C) generates maximum tax revenue.
D) reduces the effects of cost-push inflation.

E) All of the above
F) A) and B)

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Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the Accompanying short-run aggregate supply schedules. If the price level unexpectedly increases from 100 to 125, the level of real output in the short run will A) rise from $500 to $560. B) fall from $500 to $440. C) fall from $560 to $500. D) rise from $440 to $500. Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the Accompanying short-run aggregate supply schedules. If the price level unexpectedly increases from 100 to 125, the level of real output in the short run will


A) rise from $500 to $560.
B) fall from $500 to $440.
C) fall from $560 to $500.
D) rise from $440 to $500.

E) B) and C)
F) A) and B)

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Refer to the diagram for a specific economy. A reduction in structural unemployment or bottleneck problems in labor markets will A) shift this curve to the right. B) shift this curve to the left. C) move this economy southeast along the curve. D) move this economy northwest along the curve. Refer to the diagram for a specific economy. A reduction in structural unemployment or bottleneck problems in labor markets will


A) shift this curve to the right.
B) shift this curve to the left.
C) move this economy southeast along the curve.
D) move this economy northwest along the curve.

E) B) and D)
F) A) and C)

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Refer to the diagram and assume that prices and wages are flexible both upward and downward in the economy. In the extended AD-AS model, A) demand-pull inflation would involve a rightward shift of curve A, followed by a rightward shift of curve C. B) cost-push inflation would involve first a leftward shift of curve C, then a rightward shift of curve C. C) recession would involve a leftward shift of curve A, followed by a leftward shift of curve C. D) recession would involve a rightward shift of curve D, followed by leftward shifts of curves A and C. Refer to the diagram and assume that prices and wages are flexible both upward and downward in the economy. In the extended AD-AS model,


A) demand-pull inflation would involve a rightward shift of curve A, followed by a rightward shift of curve C.
B) cost-push inflation would involve first a leftward shift of curve C, then a rightward shift of curve C.
C) recession would involve a leftward shift of curve A, followed by a leftward shift of curve C.
D) recession would involve a rightward shift of curve D, followed by leftward shifts of curves A and C.

E) B) and D)
F) None of the above

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