31) Which of the following describes the distinction between the Phillips curve and the AS curve?
A) The AS curve has the price level on the vertical axis whereas the Phillips curve has the interest rate on the vertical axis.
B) The AS curve has the price level on the vertical axis whereas the Phillips curve has the rate of change in the interest rate on the vertical axis.
C) The AS curve has the price level on the vertical axis whereas the Phillips curve has the rate of wage changes on the vertical axis.
D) The AS curve has the rate of price inflation on the vertical axis whereas the Phillips curve has the rate of wage changes on the vertical axis.
E) There is no distinction: the two curves are essentially the same thing.
32) If the economy in the short run is experiencing a recessionary gap, we are likely to see
A) severe and widespread labour shortages.
B) quickly rising output prices.
C) many workers receiving employment-insurance benefits.
D) the number of employment-insurance recipients the lowest ever.
E) consumers optimistic about the future.
33) Which of the following statements about output gaps is true?
A) When actual GDP is below potential GDP, there is upward pressure on wages.
B) When actual GDP is below potential GDP, there is upward pressure on output prices.
C) When actual GDP is above potential GDP, there is downward pressure on wages.
D) When actual GDP is above potential GDP, there is downward pressure on output prices.
E) When actual GDP is above potential GDP, there is upward pressure on wages.
34) Consider the basic AD/AS diagram. The vertical line at Y* shows the relationship between the price level and the amount of output ________ have adjusted to output gaps.
A) demanded by households after all factor prices
B) supplied by firms after all factor prices
C) demanded by households before all factor prices
D) supplied by firms before all factor prices
E) supplied by firms after all output prices
35) As the macro economy adjusts from the short run to the long run,
A) wages and other factor prices adjust to close output gaps.
B) potential output is adjusting to close inflationary or recessionary gaps.
C) wages and other factor prices remain constant.
D) aggregate demand shocks cause deviations from potential output.
E) aggregate supply shocks cause deviations from potential output.
36) Following any AD or AS shock, economists typically assume that the adjustment process continues until
A) the AD and AS curves intersect each other at the correct price level.
B) real GDP returns to Y*.
C) factor prices have returned to their levels previous to the shock.
D) Y* adjusts to its long-run equilibrium level.
E) the output gap is at a stable level.
37) Refer to Table 24-1. Which of the economies is operating at its long-run equilibrium?
A) Economy A
B) Economy B
C) Economy C
D) Economy D
E) Economy E
38) Refer to Table 24-1. Which of the economies are experiencing an inflationary gap?
A) Economies A and B
B) Economies B and C
C) Economies C and D
D) Economies D and E
E) none of the economies
39) Refer to Table 24-1. Which of the following statements best describes the situation facing Economy B?
A) There is a recessionary gap of $40 billion and wages are falling slowly.
B) There is an inflationary gap of $40 billion and wages are rising.
C) There is a recessionary gap of $20 billion and wages are falling slowly.
D) There is no output gap and wages are stable.
E) There is an output gap of $20 billion and wages are rapidly adjusting.
40) Refer to Table 24-1. Consider Economy E. Which of the following best describes the positions of the aggregate demand and aggregate supply curves in this economy?
A) The AD curve has shifted to the right and the economy is in a short-run disequilibrium position.
B) The AS curve has shifted to the left and the economy is in a short-run disequilibrium position.
C) The intersection of the AD and AS curves is to the right of Y*.
D) The intersection of the AD and AS curves is to the left of Y*.
E) The intersection of the AD and AS curves coincide with the long-run aggregate supply curve.
