CHAPTER 13 MYLAB QUIZ

Long-run macroeconomic equilibrium occurs when

the aggregate demand and​ short-run aggregate supply curves intersect at a point on the​ long-run aggregate supply curve

Which of the following correctly describes the automatic mechanism through which the economy adjusts to​ long-run equilibrium?

the rightward shift of the​ short-run aggregate supply curve that occurs after a recession

A decrease in investment causes the price level to​ ________ in the short run and​ ________ in the long run.

​decrease; decrease further

An increase in investment causes the price level to​ ________ in the short run and​ ________ in the long run.

​increase; increase further

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate​ supply?

Aggregate demand and potential real GDP decrease continuously.

Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short​ run?

Aggregate demand will​ rise, the equilibrium price level will​ rise, and the equilibrium level of GDP will rise.

Inflation is generally the result of total spending growing faster than total production.

True

One factor which brought on the recession of 2007−2009 was the financial crisis in 2008.

True

Stagflation usually results from

a supply shock.

Which of the following is considered a negative supply​ shock?

an unexpected increase in the price of natural gas

A decrease in government spending will result in a decrease in the price level and a decrease in real GDP in the long run.

False

An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

False

At a short run macroeconomic​ equilibrium, real GDP is always equal to potential GDP.

False

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP does not​ rise?

SRAS and AD do not shift.

Suppose the economy is at a​ short-run equilibrium GDP that lies below potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential​ GDP?

Short-run aggregate supply will shift to the right.

When people became​ ________ concerned with the underlying value of their houses and became​ ________ concerned with the expectations of the prices of their houses​increasing, a housing bubble occurred.

less; more