1.From the perspective of classical macroeconomic theory, an excess of aggregate spending would:
a. Increase aggregate output and the level of employment in the economy
b. Decrease the rate of interest and lower the level of investment
c. Increase consumption, and thus move the economy toward the full-employment level of output
d. Increase prices, wages, and interest rates, and thus reduce aggregate spending to equal the full-employment level of output
2.The long-run aggregate supply analysis assumes that:
a. Input prices are fixed while product prices are variable
b. Input prices are variable while product prices are fixed
c. Both input and product prices are variable
d. Both input and product prices are fixed
3.An aggregate supply curve that slopes upward must be:
a. a short-run curve.
b. a long-run curve.
c. an individual firm's supply curve.
d. an individual industry's supply curve.
4.Sticky prices refers to:
a. the prices of some inputs taking longer to adjust to the price level than the output it creates.
b. the prices of some output taking longer to adjust to the price level than the inputs used to create it.
c. the price of more durable goods "sticking," and not adjusting to the price level.
d. the price of consumer goods not adjusting to the price level.
5.Something that would cause the long-run aggregate supply curve to shift to the right would be:
a. the unemployment rate decreasing.
b. discovery of a new oil reserve.
c. the inflation rate decreasing.
d. The long-run aggregate supply curve is fixed, and does not shift.
6.Temporary supply shocks:
a. are significant events that directly affect production.
b. shift the aggregate-supply curve in the short run.
c. would affect the short-run equilibrium.
d. All of these are true.
7.The long-run aggregate supply curve will shift to the right if:
a. the potential output of the economy expands.
b. the economy loses productive capacity.
c. the economy experiences a supply shock.
d. The long-run aggregate supply curve is fixed, and does not move.
8.A year-long drought that destroys most wheat crops for the season would:
a. shift the aggregate demand curve only.
b. shift the aggregate demand curve, and the short-run aggregate supply curve would shift in response.
c. shift the short-run aggregate supply curve only.
d. shift the short-run aggregate supply curve and the long-run aggregate supply curve.
9.A sudden increase in immigration would be considered a:
a. short-run supply shock.
b. long-run supply shock.
c. interest-rate shock.
d. A change in immigration would not affect any of these.
10.An economy in which output has decreased and prices have decreased would suggest a:
a. decrease in aggregate demand.
b. increase in aggregate demand.
c. decrease in short-run aggregate supply.
d. increase in short-run aggregate supply.
11.An increase in the aggregate demand for goods and services will result in an increase in the amount of output firms are willing to produce, and this increase in output will be accompanied by:
a. a decrease in the inflation rate.
b. an increase in the inflation rate.
c. a decrease in nominal GDP.
d. an increase in potential GDP.
12.When actual output exceeds potential output there is ____ output gap and the rate of inflation will tend to ____.
a. an inflationary; increase
b. an inflaionary; decrease
c. no; remain the same
d. a recessionary; increase
13.Shifts in ______ can push the economy out of long-run equilibrium.
a. the AD curve only
b. the AS curve only
c. either the AD curve or the AS curve
d. the PAE line only