Question

Question 1 (1 point)

Which of the following would shift aggregate demand to the right?

Question 1 options:

	Increased technological knowledge
	An increase in net exports
	An increase in the interest rate
	Greater availability of natural resources

Question 2 (1 point)

Which of the following would shift the current long-run aggregate supply curve to the left?

Question 2 options:

	A decrease in employment
	Increased net exports
	More capital
	Reduced investment spending

Question 3 (1 point)

According to classical economics, in the long run, the money supply and price level

Question 3 options:

	have a large impact on output
	have no impact on output

Question 4 (1 point)

In the AS/AD model, what will happen to output in the short-run when the government reduces spending?

Question 4 options:

	increase
	decrease
	no change

Question 5 (1 point)

In the AS/AD model, what will happen to the price level in the short-run when the government reduces spending?

Question 5 options:

	increase
	decrease
	no change

Question 6 (1 point)

In the AS/AD model, what will happen to output in the long-run when the government reduces spending?

Question 6 options:

	increase
	decrease
	no change

Answer 1

Q1) The answer is (b) an increase in net exports as it means that the demand from rest of the world is increasing and thus the aggregate demand curve will shift to the right.

Q2) The answer is (d) reduced investment spending as it will lead to a lower quantity of capital stock in the future and thus a lower potential output and reduced long-run aggregate supply

Q3) The answer is (b) have no impact on output as in classical economics, the money is neutral. Thus, money only affects prices and does not affect any real variables like output or employment in the economy.

Q4) The answer is (b) decreases as when the government reduces its spending, the AD curve will shift to the left, AS is unaffected and thus, the output will decrease