39. Low expected inflation leads to ____ increases in wages and costs and to ____ actual inflation.
A. large; high
B. large; low
C. small; low
D. small; high
40. High expected inflation leads to ____ increases in wages and costs and to ____ actual inflation.
A. large; high
B. large; low
C. small; low
D. small; high
41. When actual output equals potential output there is ____ output gap and the rate of inflation will
tend to ____.
A. an expansionary; increase
B. an expansionary; decrease
C. no; remain the same
D. a recessionary; increase
42. When actual output exceeds potential output there is ____ output gap and the rate of inflation will
tend to ____.
A. an expansionary; increase
B. an expansionary; decrease
C. no; remain the same
D. a recessionary; increase
43. When actual output is less than potential output, there is ____ output gap and the rate of inflation
will tend to ____.
A. an expansionary; increase
B. an expansionary; decrease
C. a recessionary; decrease
D. a recessionary; increase
44. Starting from potential output, if firms become more optimistic about the future and decide to
increase their investment in new capital, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
45. Starting from potential output, if firms become less optimistic about the future and decide to
decrease their investment in new capital, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
46. Starting from potential output, if consumer confidence increases and consumers decide to spend
more, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
47. Starting from potential output, if consumer confidence decreases and consumers decide to spend
less, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
48. The AS curve slopes upward because:
A. all firms will increase their prices in response to an increase in aggregate demand, but some will increase their output and others will decrease their output.
B. all firms will increase their prices, but not their output in response to an increase in aggregate demand.
C. some firms will increase their prices and their output in response to an increase in aggregate demand.
D. all firms will increase their prices and their output in response to an increase in aggregate demand.
49. An increase in aggregate supply is usually shown by a ______ shift of the AS curve.
A. inverse
B. upward
C. leftward
D. rightward
50. A leftward shift of the AS curve indicates:
A. a decrease in aggregate supply.
B. an increase in aggregate supply.
C. a decrease in potential GDP.
D. an increase in potential GDP.
51. As the available technology improves, ______ shifts to the _____.
A. aggregate demand; left
B. aggregate demand; right
C. aggregate supply; left
D. aggregate supply; right
52. As the number or quality of available resources improves, ______ shifts to the _____.
A. aggregate demand; left
B. aggregate demand; right
C. aggregate supply; left
D. aggregate supply; right
53. Technological improvements:
A. decrease aggregate demand.
B. increase aggregate demand.
C. decrease aggregate supply.
D. increase aggregate supply.
54. As the quality of available resources becomes worse:
A. aggregate demand falls.
B. aggregate demand rises.
C. aggregate supply falls.
D. aggregate supply rises.
55. Changes in the expected rate of inflation will:
A. not shift the AS curve.
B. shift the AS curve leftward or rightward.
C. cause the AS curve to become vertical.
D. cause the AS curve to become downward-sloping.
56. If households and firms expect higher rates of inflation, the ______ curve will shift _____.
A. AD; rightward
B. AS; rightward
C. AS; leftward
D. AD; until it becomes vertical