1) In the classical model, a shift to the right of the aggregate demand would result in

A) a permanent increase in unemployment

B) an increase in the price level

C) a permanent increase in real incomes

D) a permanent shift past full employment

2) Which of the following will NOT shift the short-run aggregate supply (SRAS) curve?

A) a reduction in the price of a raw material

B) a change in the price level

C) technological progress

D) a change in the wage rate

3) Economic growth will NOT result in inflation if aggregate demand shifts

A) outward to the right at the same speed as aggregate supply

B) outward to the right as aggregate supply shifts inward to the left

C) inward to the left as the same speed as aggregate supply

D) inward to the left as aggregate supply shifts outward to the right

4) If real Gross Domestic Product (GDP) is above its equilibrium level:

A) planned consumption is less than actual consumption

B) firms accumulate unplanned inventories

C) firms are not maximizing their profits

D) planned investment is greater than planned saving

5) When private expenditures decrease as a result of increased government spending, this is known as

A) the crowding out effect

B) government deficit spending

C) the stabilizer effect

D) the multiplier effect

6) Suppose the economy is experiencing a recessionary gap and the government increases spending to close the gap. In the short run, one would expect:

A) real Gross Domestic Product (GDP) to increase and the price level to fall

B) real Gross Domestic Product (GDP) to remain constant and the price level to rise

C) both real Gross Domestic Product (GDP) and the price level to rise

D) real Gross Domestic Product (GDP) to rise and the price level to fluctuate dramatically