AD & AS Application

An increase in aggregate demand when the economy is in equilibrium will result in (a) a decrease in unemployment (b) a decrease in the natural rate of unemployment (c) a decrease in aggregate supply (d) an increase in unplanned inventories (e) a decrease in the rate of inflation

A

If business tax rates are decreased, how will aggregate supply and employment change? Aggregate Supply - Employment (a) Increase Increase (b) Increase Decrease (c) Decrease Increase (d) Decrease Decrease (e) Not change Increase

A

One explanation for the downward slope of the aggregate demand curve is that when the price level increases, which of the following will decrease? (a) real value of assets (wealth) (b) prices of foreign goods (c) prices of substitute goods (d) expectations of future prices (e) government deficit

A

The aggregate demand curve is downward sloping because as the price level increases (A) purchasing power of wealth decreases (B) demand for imports decreases (C) demand for interest-sensitive expenditures increases (D) demand for domestically produced substitute goods increases (E) real value of fixed assets increases

A

Which is the best way to describe the AS curve in the long run? (a) always vertical in the long run (b) always upward sloping because it follows the Law of Supply (c)always horizontal (d) always downward sloping (e) without more information we cannot predict how it looks in the long run.

A

a decrease in which of the following will increase aggregate demand? (a) taxes (b) government spending (c) money supply (d) wages (e) wealth

A

the shirt-run aggregate supply curve is likely to shift to the left when there is an increase in (a) the cost of productive resources (b) productivity (c) the money supply (d) the federal budget deficit (e) imports

A

A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run effects on the price level and output Price Level Output (a) decrease No effect (b) decrease Increase (c) increase increase (d) increase decrease (e) no effect no effect

B

An increase in government spending will cause output and the price level to change in which of the following ways? Output Price Level (A) decrease Increase (B) increase Increase (C) increase No change (D) no change increase (E) no change no change

B

An increase in which of the following will increase aggregate demand? (A) taxes (B) government spending (C) the federal funds rate (D) reserve requirements (E) the discount rate

B

Changes in investment or government spending will lead to a change in which of the following? (a) the price level (b) the level of output and employment (c) interest rates (d) the aggregate supply curve (e) the demand for money, unless the economy slips into a liquidity trap

B

If aggregate demand increases due to an increase in net exports, then output and the unemployment rate are most likely to change in which of the following ways? output rate (a) increase increase (b) increase decrease (c) decrease increase (d) decrease decrease (e) decrease increase

B

A change in which of the following with cause the short-run aggregate supply curve to shift? 1. The price level 2. Government spending 3. The cost of all inputs (A) 1 only (B) 2 only (C) 3 only (D) 1 and 2 only (E) 1, 2, and 3

C

An increase in government expenditure will most likely (a) reduce the price level (b) reduce the level of nominal gross domestic product (c) increase real gross domestic product (d) shift the short-run aggregate supply curve to the right (e) shift both the aggregate demand curve and the long run aggregate supply curve to the left

C

The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of (a) the real investment and the interest rate (b) real disposable income and unemployment (c) real national output and the price level (d) government expenditures and taxes (e) imports and exports

C

The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT (a) capital stock (b) labor supply (c) real interest rate (d) rate of technological innovation (e) spending on education and training

C

Which of the following are the most likely short-run effects of an increase in government expenditures? Unemployment Rate - Inflation Rate - Real GDP (a) increase increase increase (b) increase increase decrease (c) decrease increase increase (d) decrease decrease increase (e) no change decrease increase

C

Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve? (a) an increase in interest rates (b) a tax increase of 50 cents per gallon of gasoline (c) an across-the-board reduction of wages in the manufacturing sector (d) the passage of legislation mandating a reduction in automobile pollution (e) the shutdown of plants and movement of production of goods abroad

C

An increase in government spending will most likely result in a decrease in the (A) real level of output (B) price level (C) interest rate (D) unemployment rate (E) government's budget deficit

D

An increase in which of the following would cause the aggregate demand curve to shift to the left? (a) consumer optimism (b) population (c) cost of resources (d) taxation (e) net exports

D

which of the following changes in the aggregate demand and aggregate supply curves is likely to result in a decrease in real GDP? (a) the long-run aggregate supply curve shifts to the right when the economy is in the classical range of the long run aggregate supply curve. (b) the aggregate supply curve shifts to the right when the economy is in the classical range of the aggregate supply curve. (c) the aggregate demand curve shifts to the right when the economy is in the Keynesian range of the aggregate supply curve (d) the aggregate supply curve shifts to the left (e) the aggregate supply curve shifts to the right

D

A contraction army supply shock, which moves the SRAS to the left, would most likely result in (A) an increase in the money supply (B) an increase in national income (C) an increase in gross domestic product (D) a decrease in the general price level (E) a decrease in employment (an increase in unemployment)

E

An adverse supply shock such as a drought, will most likely cause which of the following? (a) a decrease in the price level and a decrease in real GDP (b) a decrease in the price level and an increase in real GDP (c) an increase in the price level and an increase in real GDP (d) an increase in the price level and an increase in real GDP (e) an increase in the price level and a decrease in real GDP

E

An increase in which of the following is most likely to cause the short-run aggregate supply curve to shift to the left? (a) consumers' incomes (b) the money supply (c) government spending (d) the optimism of business firms (e) the per unit cost of production

E