Question : 41) Refer to Table 24-1. How the adjustment asymmetry demonstrated : 1384409

41) Refer to Table 24-1. How is the adjustment asymmetry demonstrated when comparing Economy A to Economy E?

A) The size of the output gap is the same in Economies A and E, but wages are rising in A and falling in E.

B) The output gap is larger in Economy A, yet wages are changing more slowly.

C) The output gap is much larger in Economy E, so wages are changing at a faster rate.

D) The size of the output gap is the same in Economies A and E but wages are falling more slowly in A than they are rising in E.

E) There is insufficient data with which to observe the adjustment asymmetry.

42) Refer to Table 24-1. Which of the following statements explains why wages are rising in Economy E?

A) The inflationary gap generates lower profits for firms because workers are demanding higher wages.

B) The inflationary gap generates excess demand for labour, which causes wages to rise.

C) The aggregate supply curve is shifting to the right, which is causing wages to rise.

D) The aggregate demand curve is shifting to the right, causing wages to rise.

E) Potential output is rising, putting upward pressure on wages.

43) Refer to Table 24-1. In which economy is there the most unused capacity?

A) Economy A

B) Economy B

C) Economy C

D) Economy D

E) Economy E

44) Suppose that the economy is initially in a long-run macroeconomic equilibrium. A shock then hits the economy and we observe that the unemployment rate decreases and the price level increases. We can conclude that ________ has increased and there is now a(n) ________ gap.

A) aggregate supply; inflationary

B) aggregate demand; recessionary

C) aggregate supply; recessionary

D) aggregate demand; inflationary

45) Suppose the following conditions are present in the economy:

A) There is an inflationary output gap; aggregate demand will continue to increase, causing the AD curve to shift to the right. The price level will rise until equilibrium is restored at .

B) The economy is in equilibrium at , but wages are rising. The AS curve will shift to the left until a new equilibrium is reached at a higher price level.

C) There is a recessionary output gap; wages and other factor prices will rise; the AS curve will shift to the left until equilibrium is restored at .

D) There is an inflationary output gap; wages and other factor prices will rise; the AS curve will shift to the left until equilibrium is restored at .

E) There is a recessionary output gap; aggregate demand will rise, causing the AD curve to shift to the right until equilibrium is restored at .

46) Suppose the following conditions are present in the economy:

A) Output is below potential; aggregate demand will fall, causing the AD curve to shift to the left. The price level will fall until equilibrium is restored at .

B) The economy is in equilibrium at , but wages are falling. The AS curve will shift to the right until a new equilibrium is reached at a lower price level.

C) Output is below potential; wages will eventually fall; the AS curve will slowly shift to the right until equilibrium is restored at .

D) Output is above potential; wages will fall, causing the AS curve to shift to the right until equilibrium is restored at .

E) Output is above potential; aggregate demand will fall, causing the AD curve to shift to the left until equilibrium is restored at .

47) Consider the adjustment of factor prices to output gaps in the basic AD/AS macro model. The experience of many economies suggests that

A) downward pressure on wages during slumps results in sharply increased labour costs.

B) upward pressures on wages are largely ineffective in booms.

C) downward pressure on wages during slumps is not as intense as upward pressure on wages during booms.

D) unit labour costs fall quickly during booms.

E) slumps and booms are not common; the economy is usually in equilibrium at potential output.

48) An important asymmetry in the behaviour of the AS curve is that

A) prices are sticky but wages are not.

B) positive output gaps can persist for a long time without causing increases in wages and prices, whereas negative output gaps lead to immediate reductions in wages and prices.

C) negative output gaps can persist for a while without causing large decreases in wages and prices, whereas positive output gaps lead more quickly to increases in wages and prices.

D) wages are very flexible in the downward direction, but not in the upward direction.

E) wages and prices are equally sticky in both directions.

49) The wage-adjustment process is asymmetrical because

A) factor prices fluctuate more frequently than goods prices.

B) goods prices rise more quickly than factor prices.

C) employers delay wage increases in a boom but lay off workers quickly during a slump.

D) taxes rise quickly in a boom but do not fall during a slump.

E) wages rise quickly in a boom but fall slowly during a slump.

50) An important asymmetry in the behaviour of aggregate supply is the

A) changing slope of the aggregate demand curve.

B) difference between actual and potential output.

C) different relative sizes of inflationary versus recessionary gaps.

D) economy’s path of potential output as a result of labour force growth.

E) different speeds at which factor prices adjust to positive and negative output gaps.