QUESTION 37 Suppose that in a given economy the inflation rate increases from 2% to 3% and national output falls from £600 billion to £560 billion in the course of a year. What is the likely cause of this situation? O a. Demand pull inflation. O b. Flexible prices in declining industries. O c. Higher input prices. O d. A shift of the aggregate demand curve to the left. 4

QUESTION 37 Suppose that in a given economy the inflation rate increases from 2% to 3% and national output falls from £600 billion to £560 billion in the course of a year. What is the likely cause of this situation? O a. Demand pull inflation. O b. Flexible prices in declining industries. O c. Higher input prices. O d. A shift of the aggregate demand curve to the left. 4

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Measuring The Cost Of Living

Section: Chapter Questions

Problem 9PA

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QUESTION 5Which of the following best describes inflation?O a. Economic growth.O b. An increase only in the price of energy.O c. An increase in the overall price level in an economy.O d. Ballooning debt.
The short-run aggregate supply curve has: O A. a positive slope because as the inflation rate increases, so does the quantity of output supplied. OB. a positive slope because as the inflation rate increases, the quantity of output supplied decreases. C. a negative siope because as the inflation rate increases, the quantity of output supplied decreases. O D. a negative slope because as the inflation rate increases, so does the quantity of output supplied.
Suppose an economy that has been operating at full employment has been experiencing percent annual inflation. If output later falls to a level that is less than potential output, prices generally will begin to rise at O A. a rate less than 4 percent. O B. a rate greater than 4 percent. O C. a rate of 0 percent. O D. a rate of 4 percent. Click to select your answer. esc & %23 24 % 9 4. T Y
The long-run aggregate supply curve is Select one: O a.a vertical line through the non-inflationary rate of output. O b.a vertical line through the natural rate level of output. O ca horizontal line through the current level of output. d. a vertical line through the current level of output.
If the input cost adjustment process works very slowly so that actual output differs from potential output for a long period of time, then None of the answers is correct O b. Active stabilization policies are probably not justified O c. Active stabilization policies are likely to create hyper-inflation O d. Active stabilization policy may widen the output gap even further
Assume the economy is initially operating at the natural level of output. Which of the following events will initially cause a shift of the aggregate supply curve? Select one: O a. An increase in the money supply. O b. An increase in consumer confidence. O c. An increase in government spending. O d. All of the above. e. None of the above.
All of the following, except one, will cause an increase in aggregate demand. Which is the exception? a. A decrease in the exchange rate. O b. An increase in government spending. O c. A decrease in the interest rates. O d. A decrease in the price level.
Which of the following statements is correct? O A. The price level does not effect the level of real GDP demanded. O B. The higher the price level, the more.the aggregate demand curve shifts rightward. OC. The lower the price level, the greater the quantity of real GDP demanded O D. The lower the price level, the more the aggregate demand curve shifts leftward. E. The lower the price level, the more the aggregate demand curve shifts rightward.
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QUESTION 17 Inflation initiated by increases in wages or other resource prices is labeled O a. demand-pull inflation. O b. demand-push inflation. O c. cost-push inflation. O d. cost-pull inflation. QUESTION 18 Suppose nominal GDP was $360 billion in year 1 and $450 billion in year 2. The price index was 120 in year 1 and 125 in year 2. Between year 1 and year 2. real GDP O a. Increased by $60 billion. O b. decreased by $32 billion. O c. increased by $100 billion. O d. increased by $117 billion. QUESTION 19 Real GDP accounts for changes in product quality: nominal GDP does not. True False
Which of the following statements is TRUE regarding the Fisher Effect? O A. The Fisher Effect illustrates the inverse relationship between inflation and nominal interest rates. O B. Nominal interest rates are directly related to expected inflation in part because borrowers want to protect their purchasing power reward from being wiped out by lower inflation. O c. If prices rise by 7% and your salary increases by 9%, you will experience a gain of purchasing power. O D. Ceteris paribus, the higher the inflation, the higher the real interest rate.
Which one of the following is the definition of 'normal output'? Select one: O a. Output that is consistent with unstable inflation. O b. Output that is consistent with deflation. O c. None of the other (or remaining) answer options are correct. O d. Output that is consistent with stable inflation. O e. Output that is inconsistent with stable inflation.