Question 1

3 to T4 would: A)  Decrease tax revenues and support the views of supply-side economists B)  Increase tax revenues and support the views of supply-side economists C)  Increase tax revenues and support the views of mainstream economists D)  Decrease tax revenues and support the views of mainstream economists" class="answers-bank-image d-inline" rel="preload" > Refer to the Laffer Curve above. An increase in the tax rate from T3 to T4 would:

Accepted Answer

A)   Decrease tax revenues and support the views of supply-side economists
B)   Increase tax revenues and support the views of supply-side economists
C)   Increase tax revenues and support the views of mainstream economists
D)   Decrease tax revenues and support the views of mainstream economistsE) All of the above
F) None of the above

Question 2

Given a Phillips Curve with stable and predictable inflation and unemployment rate tradeoffs, it appears that:

Accepted Answer

A)   An expansionary fiscal policy can shift the curve to the left
B)   A tight money policy can shift the curve to the right
C)   Manipulating aggregate demand through fiscal and monetary policies has the effect of causing a movement along the curve
D)   Manipulating aggregate demand through fiscal and monetary policies has the effect of shifting the curveE) A) and C)
F) B) and D) C

Question 3

Refer to the graph above. Critics of supply-side economics would argue that tax rates are currently between:

Accepted Answer

A)   b and d and that a decrease in tax rates will decrease tax revenues
B)   0 and b and that a decrease in tax rates will decrease tax revenues
C)   0 and b and that a decrease in tax rates will increase tax revenues
D)   b and d and that a decrease in tax rates will increase tax revenuesE) B) and D)
F) B) and C)

Question 4

Refer to the graph above. 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 __.

Accepted Answer

A)   A; C
B)   D; B
C)   A; A
D)   D; AE) A) and B)
F) A) and D)

Question 5

5 to T4 would: A)  Decrease tax revenues and support the views of supply-side economists B)  Increase tax revenues and support the views of supply-side economists C)  Increase tax revenues and support the views of mainstream economists D)  Decrease tax revenues and support the views of mainstream economists" class="answers-bank-image d-inline" rel="preload" > Refer to the Laffer Curve above. A cut in the tax rate from T5 to T4 would:

Accepted Answer

A)   Decrease tax revenues and support the views of supply-side economists
B)   Increase tax revenues and support the views of supply-side economists
C)   Increase tax revenues and support the views of mainstream economists
D)   Decrease tax revenues and support the views of mainstream economistsE) A) and B)
F) A) and C)

Question 6

1 to AD2 given a stable AS1 curve B)  AD2 to AD1 given a stable AS1 curve C)  AS1 to AS2 given a stable AD1 curve D)  AS2 to AS1 given a stable AD1 curve" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above. Stagflation in the short run is best represented as resulting from a shift of:

Accepted Answer

A)   AD1 to AD2 given a stable AS1 curve
B)   AD2 to AD1 given a stable AS1 curve
C)   AS1 to AS2 given a stable AD1 curve
D)   AS2 to AS1 given a stable AD1 curveE) A) and C)
F) None of the above

Question 7

The adjustment mechanism that brings the economy to its long-run aggregate supply has to do with inflation-expectations, whereas the adjustment to the long-run Phillips curve has to do with wage flexibility.

Accepted Answer

A) True 
 B)False

Question 8

In the short run, demand-pull inflation will drive up the price level and increase real output; but in the long run, only the price level will rise.

Accepted Answer

A) True 
 B)False  True

Question 9

Refer to the graph above. Ongoing inflation would occur if the Fed:

Accepted Answer

A)   Increases the money supply causing AD to shift faster than technological progress shifts AS
B)   Increases the money supply causing AD to shift slower than technological progress shifts AS
C)   Increases the money supply causing AD to shift as fast as technological progress shifts AS
D)   Does not increase the money supply while technological progress is shifting ASE) None of the above
F) B) and C)

Question 10

Refer to the graph above. If tax rates are between b and d, then supply-side economists are of the opinion that a(n) :

Accepted Answer

A)   Increase in tax revenues will increase tax rates
B)   Decrease in tax rates will increase tax revenues
C)   Increase in tax rates will increase tax revenues
D)   Decrease in tax revenues will decrease tax ratesE) A) and B)
F) C) and D)

Question 11

2 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: A)  AD to the right B)  AD to the left C)  AS to the right D)  AS to the left" class="answers-bank-image d-inline" rel="preload" > 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:

Accepted Answer

A)   AD to the right
B)   AD to the left
C)   AS to the right
D)   AS to the leftE) A) and C)
F) A) and B)

Question 12

In the long run, if the price level increases, then nominal wages and other input prices:

Accepted Answer

A)   Also rise, so firms will reduce their output level
B)   Also rise, so firms will not change their output level
C)   Not change, so firms will not change their output level
D)   Decrease, so firms will increase their output levelE) A) and B)
F) All of the above

Question 13

2 to T3 and increased tax revenues from R2 to R3 B)  Decreased tax rates from T3 to T2 and increased tax revenues from R2 to R3 C)  Decreased tax rates from T3 to T2 and decreased tax revenues from R3 to R2 D)  Increased tax rates from T2 to T3 and decreased tax revenues from R3 to R2" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above. A movement from point C to point D on the Laffer Curve represents:

Accepted Answer

A)   Increased tax rates from T2 to T3 and increased tax revenues from R2 to R3
B)   Decreased tax rates from T3 to T2 and increased tax revenues from R2 to R3
C)   Decreased tax rates from T3 to T2 and decreased tax revenues from R3 to R2
D)   Increased tax rates from T2 to T3 and decreased tax revenues from R3 to R2E) A) and D)
F) All of the above

Question 14

Which factor contributed to the demise of stagflation during the 1982-1989 period?

Accepted Answer

A)   A lessening of foreign competition
B)   The decline of the monopoly power of OPEC
C)   An increase in the per-unit cost of production
D)   An increase in regulation of airline and trucking industriesE) A) and B)
F) All of the above

Question 15

A stable Phillips curve does not allow for the possibility of stagflation.

Accepted Answer

A) True 
 B)False

Question 16

Economist Arthur Laffer argued that Robin Hood and his men would:

Accepted Answer

A)   Be more efficient if they confiscated only the possessions of every fifth traveler through Sherwood Forest
B)   Manage the resources in Sherwood Forest better by establishing checkpoints for travelers entering and exiting
C)   Collect more tax revenue if they only collected a relatively small tax from each traveler through Sherwood Forest
D)   Be more equitable to travelers through Sherwood Forest if they only took possessions from those who could afford itE) B) and D)
F) B) and C)

Question 17

In the short run, nominal wages and other input prices are assumed to be:

Accepted Answer

A)   Unresponsive to product price-level changes, but in the long run they are assumed to be responsive
B)   Unresponsive to product price-level changes, and in the long run they are assumed to be unresponsive also
C)   Responsive to product price-level changes, but in the long run they are assumed to be unresponsive
D)   Responsive to product price-level changes, and in the long run they are assumed to be responsive alsoE) A) and D)
F) None of the above

Question 18

The experience of the U.S. with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Accepted Answer

A) True 
 B)False

Question 19

The implication of the long-run Phillips Curve is that there is no trade-off between inflation and unemployment in the long-run.

Accepted Answer

A) True 
 B)False  True

Question 20

The long-run Phillips Curve is essentially a horizontal line at the economy's natural rate of inflation.

Accepted Answer

A) True 
 B)False

Exam 18: Extending the Analysis of Aggregate Supply

Refer to the Laffer Curve above. An increase in the tax rate from T₃ to T₄ would:

Correct Answer
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Given a Phillips Curve with stable and predictable inflation and unemployment rate tradeoffs, it appears that:

Correct Answer
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C

Refer to the graph above. Critics of supply-side economics would argue that tax rates are currently between:

Correct Answer
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Correct Answer
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Refer to the Laffer Curve above. A cut in the tax rate from T₅ to T₄ would:

Correct Answer
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Refer to the graph above. Stagflation in the short run is best represented as resulting from a shift of:

Correct Answer
verified

The adjustment mechanism that brings the economy to its long-run aggregate supply has to do with inflation-expectations, whereas the adjustment to the long-run Phillips curve has to do with wage flexibility.

Correct Answer
verified

In the short run, demand-pull inflation will drive up the price level and increase real output; but in the long run, only the price level will rise.

Correct Answer
verified
True

Refer to the graph above. Ongoing inflation would occur if the Fed:

Correct Answer
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Refer to the graph above. If tax rates are between b and d, then supply-side economists are of the opinion that a(n) :

Correct Answer
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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:

Correct Answer
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In the long run, if the price level increases, then nominal wages and other input prices:

Correct Answer
verified

Refer to the graph above. A movement from point C to point D on the Laffer Curve represents:

Correct Answer
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Which factor contributed to the demise of stagflation during the 1982-1989 period?

Correct Answer
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A stable Phillips curve does not allow for the possibility of stagflation.

Correct Answer
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Economist Arthur Laffer argued that Robin Hood and his men would:

Correct Answer
verified

In the short run, nominal wages and other input prices are assumed to be:

Correct Answer
verified

The experience of the U.S. with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Correct Answer
verified

The implication of the long-run Phillips Curve is that there is no trade-off between inflation and unemployment in the long-run.

Correct Answer
verified
True

The long-run Phillips Curve is essentially a horizontal line at the economy's natural rate of inflation.

Correct Answer
verified

Exam 18: Extending the Analysis of Aggregate Supply

Refer to the Laffer Curve above. An increase in the tax rate from T3 to T4 would:

Correct AnswerverifiedShow Answer

Given a Phillips Curve with stable and predictable inflation and unemployment rate tradeoffs, it appears that:

Correct AnswerverifiedC

Refer to the graph above. Critics of supply-side economics would argue that tax rates are currently between:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the Laffer Curve above. A cut in the tax rate from T5 to T4 would:

Correct AnswerverifiedShow Answer

Refer to the graph above. Stagflation in the short run is best represented as resulting from a shift of:

Correct AnswerverifiedShow Answer

The adjustment mechanism that brings the economy to its long-run aggregate supply has to do with inflation-expectations, whereas the adjustment to the long-run Phillips curve has to do with wage flexibility.

Correct AnswerverifiedShow Answer

In the short run, demand-pull inflation will drive up the price level and increase real output; but in the long run, only the price level will rise.

Correct AnswerverifiedTrue

Refer to the graph above. Ongoing inflation would occur if the Fed:

Correct AnswerverifiedShow Answer

Refer to the graph above. If tax rates are between b and d, then supply-side economists are of the opinion that a(n) :

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

In the long run, if the price level increases, then nominal wages and other input prices:

Correct AnswerverifiedShow Answer

Refer to the graph above. A movement from point C to point D on the Laffer Curve represents:

Correct AnswerverifiedShow Answer

Which factor contributed to the demise of stagflation during the 1982-1989 period?

Correct AnswerverifiedShow Answer

A stable Phillips curve does not allow for the possibility of stagflation.

Correct AnswerverifiedShow Answer

Economist Arthur Laffer argued that Robin Hood and his men would:

Correct AnswerverifiedShow Answer

In the short run, nominal wages and other input prices are assumed to be:

Correct AnswerverifiedShow Answer

The experience of the U.S. with supply-side policies is that tax cuts affect the economy more on the demand side rather than the supply side.

Correct AnswerverifiedShow Answer

The implication of the long-run Phillips Curve is that there is no trade-off between inflation and unemployment in the long-run.

Correct AnswerverifiedTrue

The long-run Phillips Curve is essentially a horizontal line at the economy's natural rate of inflation.

Correct AnswerverifiedShow Answer

Refer to the Laffer Curve above. An increase in the tax rate from T₃ to T₄ would:

Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Refer to the Laffer Curve above. A cut in the tax rate from T₅ to T₄ would:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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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:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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