Question : 13.1   Aggregate Supply 1) Over the business cycle, factors such as : 1240516

13.1   Aggregate Supply

1) Over the business cycle, factors such as the quantity of capital, human capital and technology

A) grow but do not fluctuate as much as the quantity of labor employed.

B) change drastically, fluctuating more than the quantity of labor employed.

C) fluctuate about the same amount as the quantity of labor employed.

D) do not grow and are therefore not the source of economic growth.

E) change randomly, sometimes growing, sometimes falling.

2) Over a business cycle, the quantities of capital, human capital, and entrepreneurial talent

A) change gradually and do not fluctuate much.

B) cycle alongside real GDP.

C) are completely unpredictable and cannot be forecast.

D) cycle more than real GDP.

E) are constant and do not change.

3) Which of the following does NOT affect potential GDP?

A) the quantity of money

B) the quantity of labor employed

C) the quantity of capital and human capital

D) the amount of entrepreneurial talent available

E) the quantity of land and natural resources

4) Potential GDP

A) increases as the price level increases because firms supply more goods and services.

B) decreases as the price level increases because people demand fewer goods and services.

C) might either increase or decrease as the price level increases, depending on whether aggregate demand increases or decreases.

D) is independent of the price level.

E) never changes.

5) The line showing potential GDP is a vertical straight line because

A) there is only one level of full employment at any point in time.

B) economists are unsure about how to determine potential GDP.

C) it represents the minimum level of real GDP in a recession.

D) when nothing else changes, a higher price level has no effect on real GDP.

E) the aggregate supply curve is upward sloping.

6) A rise in the price level produces ________ the potential GDP line.

A) a rightward shift of

B) a movement downward along

C) a leftward shift of

D) a movement upward along

E) neither a shift of the potential GDP line nor a movement along

7) Which of the following is true?

A) Aggregate supply is another name for potential GDP.

B) Potential GDP increases as the price level increases.

C) At full employment, aggregate supply is equal to potential GDP.

D) Potential GDP decreases as the price level increases.

E) The potential GDP line has a negative slope.

8) Moving along the potential GDP line, when the price level changes, the

i.real wage rate stays at the full-employment equilibrium level.

ii.money wage rate changes by the same percentage.

iii.money prices of non-labor resources change by the same percentage.

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

9) The real wage rate definitely falls if the money wage rate ________ and the price level ________.

A) remains constant; rises

B) remains constant; falls

C) rises; falls

D) rises; rises

E) falls; falls

10) A fall in the real wage rate ________ firms’ profits and leads to ________ in the quantity supplied.

A) raises; an increase

B) raises; a decrease

C) lowers; an increase

D) lowers; a decrease

E) does not change; no change