AD & AS & AD/AS Model
A decrease in which of the following will increase aggregate demand?
Taxes
An increase in government spending will most likely result in a decrease in the
unemployment rate
Assume that the economy is at full-employment equilibrium. Which of the following would lead to stagflation?
A leftward shift of the short-run aggregate supply curve only
If AD and AS represent aggregate demand and aggregate supply curves, respectively, and the arrows indicate the movement of the curves, which of the following graphs best illustrates long-run economic growth?
AD shifting to the right while AS stays in the same spot
If business tax rates are decreased, how will aggregate supply and employment change? (For employment, think about the effect of business taxes on real GDP)
Aggregate Supply: increase Employment: increase
Which is the best way to describe the AS curve in the long run?
Always vertical in the long run
When firms decrease their investment spending, which of the following will take place in the short run?
GDP will decrease & Price Level will decrease
If nominal wages decrease, which of the following will take place in the short run?
GDP will increase & Price Level will decrease
A change in which of the following will cause the Short-Run aggregate supply curve to shift? I. The Price Level II. Government Spending III. The cost of all inputs
III only
If the economy is at point X, which of the following describes the likely adjustment to long-run equilibrium?
Nominal wages decrease, and the short-run aggregate supply curve shifts right until the economy reaches long-run equilibrium
An increase in government spending will cause output and the price level to change in which of the following ways?
Output: increase Price Level: increase
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: increase Unemployment Rate: decrease
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: decrease Output: increase Unemployment: decrease
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: increase Output: decrease
If aggregate demand increases due to an increase in net exports, then the price level, output, and the unemployment rate are most likely to change in which of the following ways?
Price Level: increase Output: increase Unemployment Rate: decrease
Which of the following are the most likely short-run effects of an increase in government expenditures?
Unemployment Rate: decrease Inflation Rate: increase Real Gross Domestic Product: increase
A contractionary supply shock would most likely result in
a decrease in employment
An increase in aggregate demand when the economy is in equilibrium will result in
a decrease in unemployment
In Panel (b), the intersection of AD with SRAS indicates:
a short-run equilibrium
In Panel (a), the intersection of SRAS with AD indicates:
an economy experiencing a recessionary gap
At the Y2 level of real GDP:
an inflationary gap exists equal to the different between Y2 and Yp
In Panel (b), the level of real GDP represented by Yp:
is potential output for this economy
The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of
real national output (GDPr) and the price level
Assume that the economy is initially in long-run equilibrium at Yp and P1. Now suppose that there is an increase in the level of government purchases at each price level. This will:
shift aggregate demand from AD1 to AD2
A recessionary gap would be largest at which position on the business cycle?
trough
