Question

An increase in aggregate demand (AD) can cause

a recession in the economy.

an increase in cyclical unemployment.

an expansion in the economy.

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Question 22 pts

Economic growth is shown in the AS-AD model as a

leftward shift in the short run AS curve.

rightward shift in the AD curve.

rightward shift in the long run AS curve.

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Question 32 pts

In the long run, the most important factor that shifts the aggregate supply curve is

inflation.

business confidence.

technological change.

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Question 42 pts

Aggregate supply curves, for high levels of output, are ________ and ________ for low levels of output.

relatively steep; relatively flat

relatively steep; remain steep

relatively flat; remain flat

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Question 52 pts

The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels?

Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.

Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.

Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.

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Question 62 pts

What is the best explanation for the slope of the neoclassical zone of the aggregate supply curve?

A small increase in aggregate demand when the economy is operating below its potential output will not have much effect on the price level.

An increase in aggregate demand causes both real output and the price level to increase.

A small an increase in aggregate demand when the economy is operating at potential output causes the price level to rise, with little or no effect on real output.

Answer 1

a) "C"

An increase in the aggregate demand can cause an expansion in the economy. it will shift the demand curve to the right.

b) "B"

A right ward shift in the aggregate demand curve will mean a growth in the economy.

c) "C"

The technological change in the economy will shift the LRAS to the right.

d) "A"

They are relatively steep for high level of output and it will remain flat for lower of output.

e) "B"

With an increase in the supply, the supply curve will shift to the right at a lower price and higher output, Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.

f) "C"

An increase in the demand will lead to an increase in the price and no change in the real output. once the economy is operating at the potential output.