Macroeconomics final exam

The economy can only be in long-run equilibrium at the intersection of which of the following curves?

SRAS, LRAS, and AD

From point B (if there is no government intervention) the economy will eventually return to a long run equilibrium. What point will be the economy's new long run equilibrium in the graph above?

C

What could cause the economy to move from point A to point B in the graph above?

An increase in taxes

Consider the figure above. The economy is in the short-run equilibrium at point _____.

B

In the short run, a rightward shift in the aggregate demand curve, beginning from equilibrium, will tend to cause which of the following to increase?

Both A and B, but not C

Consider the figure above and assume the economy is in the short-run equilibrium. As the economy moves to long-run equilibrium at point ____, input prices will ________.

D; increase

Which one of the following statements is correct?

If the economy is not in long-run equilibrium then the short-run aggregate supply curve will shift position

According to the information given in the figure above, as the economy moves from its short-run equilibrium to a new long-run equilibrium, which of the following will occur?

Short-run aggregate supply curve will shift to the left (upward)

Starting at point A in the graph above, assume a decrease in government spending shifts Aggregate Demand (AD) to the left and so the economy moves to point B. Which of the following is true?

The economy has contracted towards a trough in its business cycle

Why CAN'T the economy stay at point B in the graph above?

The expected input prices are higher than the price level of final goods and services

Short-run equilibrium occurs at an output level that is greater than the natural level of real output. As the economy adjusts to reach long-run equilibrium what would we predict?

The unemployment rate will increase

Which of the following will be true if unemployment is below its natural rate?

There will be upward pressure on wages

Consider the figure above. Which of the following is NOT true of the short run equilibrium?

Unemployment is below the natural rate

In the graph above, the expected input prices at point A are __________ the expected input prices at point B.

equal to

Government spending is reduced. Subsequently, in the short run, the unemployment rate will ________ and real output will _________.

increase; decrease