AD AND AS

11) The Long Run Aggregate Supply curve is determined by ___________. A) Capital, technology, and institutions B) The price level C) The Aggregate Demand curve D) Stock market performances

A LRAS is primarily determined by factors like technological progress, capital accumulation, andinstitutional factors, not the price level or stock marke

2) What happens to the aggregate demand (AD) curve when there is an increase in governmentspending? A) AD shifts left B) AD shifts right C) Movement up and to the left along the AD curve D) Movement down and to the right along the AD curv

B

3) What happens to the aggregate supply (AS) curve when there is a fall in resources prices? A) AS shifts left B) AS shifts right C) Movement up and to right along the AS curve D) Movement down and to the left along the AS curve

B

Assume LRAS is fixed for this question. Tucker owns a factory that produces bicycles. ADincreases and this leads to higher price level. What do we expect to happen in the short runaccording to what we learn in class? A) He will sell at higher prices, but he will also pay higher wages, so he is no better orworse off than he was before the inflation B) His labor costs will be unchanged, and he will increase his quantity supplied C) He will produce fewer units because his labor costs have gone up D) His supply curve will shift to the righ

B

In the short run, an increase in aggregate demand (AD) with a fixed aggregate supply (AS)will likely result in: A) Lower prices and higher output B) Higher prices and higher output C) Lower prices and lower output D) Higher prices and lower outpu

B

What happens to the long-run aggregate supply (LRAS) curve when there is an increase inproductivity due to the introduction of computer technology? A) LRAS shifts left B) LRAS shifts right C) Movement up along the LRAS curve D) Movement down along the LRAS curve

B

10) What does the vertical shape of the Long-Run Aggregate Supply (LRAS) curve represent,and what fundamental principle does it illustrate? A) The vertical LRAS curve represents the short-term production capacity of theeconomy and its flexibility B) The vertical LRAS curve represents the relationship between inflation andunemployment in the long run C) The vertical LRAS curve illustrates that the economy's potential output at full-employment, it remains constant regardless of changes in the price level D) The vertical LRAS curve represents the impact of government spending on long-term economic growth

C

4) When there is a decrease in interest rates, there is ________ investment, and AD shifts_______. A) more, leftward B) less, leftward C) more, rightward D) more, leftward

C

5) What happens when there is an increase in the price level? A) AS shifts left B) AS shifts right C) Movement up and to right along the AS curve D) Movement down and to the left along the AS curv

C

13) Which of the following would lead to "stagflation"? A) AD shifts right B) AD shifts left C) AS shifts left D) AS shifts righ

C Stagflation is characterized by high inflation and high unemployment, which can occur when theAS curve shifts left, reducing supply capacity

17) According to what we learned in class, which of the following is true of long runequilibrium GDP and price level when aggregate demand shifts to the right? (Hint: Long runAS is not moving in this question). A) Long run equilibrium GDP increases, and the price level increases B) Long run equilibrium GDP increases and the price level is unchanged C) Long run equilibrium GDP is unchanged, and the price level is unchanged D) Long run equilibrium GDP is unchanged, and the price level increase

D

Which of the following would lead to an increase in GDP and a decrease in the price level? A) AS shifts right B) AD shifts right C) The Long Run Aggregate Supply curve shifts left D) AD shifts left

A An increase in aggregate supply (AS shifting right) can lead to higher GDP and lower prices asthe economy becomes more productive

12) If the country of Spartania is at full-employment, the GDP is $10 billion. In equilibrium,where does the Aggregate Supply curve intersect the Aggregate Demand curve? A) At a GDP of $10 billion B) At a GDP below $10 billion C) At a GDP above $10 billion

A

15) Initially, GDP is $10 billion. Consumers suddenly become worried about losing their jobs.What happens in the short run? A) GDP falls and the price level falls B) GDP falls and the price level rises C) GDP rises and the price level falls D) GDP rises and the price level rises

A

6) In the context of the Phillips Curve, what relationship does it primarily illustrate? A) The inverse relationship between inflation and unemployment B) The direct relationship between inflation and economic growth C) The relationship between government spending and fiscal policy D) The relationship between interest rates and monetary policy

A

9) Assume LRAS is fixed for this question. Tucker owns a factory that produces bicycles. ADincreases and this leads to higher price level. What do we expect to happen in the long runaccording to what we learn in class? A) He will sell at higher prices, but he will also pay higher wages, so he is no better orworse off than he was before the inflation B) His labor costs will be unchanged, and he will increase his quantity supplies C) He will produce fewer units because his labor costs have gone up D) His supply curve will shift to the righ

A

What does the Aggregate Demand (AD) curve indicate? A) The relationship between the quantity of goods and services demanded and the pricelevel B) The relationship between government spending and GDP C) The relationship between exports and imports D) The relationship between inflation and unemploymen

A