Question

1-

The long-run aggregate supply curve assumes that

		the unemployment rate is more than 9 percent.
		only laborers are fully employed.
		all factors of production are fully employed.
		there is no government purchasing of goods and services.

2-The natural rate of unemployment will help determine

		the level of economic growth in the economy.
		the position of the long-run aggregate supply curve.
		low levels of inflation.
		the open economy effect.

3-The vertical axis for an aggregate demand curve measures

		real income.
		nominal GDP per year.
		the price level.
		real GDP per year.

4-When a change in the price level causes a change in the purchasing power of currency, which then changes the desired rate of consumption at all income levels, it is called

		the substitution effect.
		the interest rate effect.
		the open-economy effect.
		the real-balance effect.

5-An increase in aggregate spending that is caused by a factor other than the price level will lead to the

		aggregate demand curve shifting to the right.
		aggregate supply curve shifting to the left.
		aggregate supply curve shifting to the right.
		aggregate demand curve shifting to the left.

Answer 1

1. Option 3. all factors of production are fully employed

Explanation: The long-run aggregate supply reflects the production potential of an economy and it assumes that all the factors of production are fully employed.

2. Option 2. the position of the long-run aggregate supply curve

Explanation: Natural rate of unemployment takes place when actual output equals the potential output. This helps in determining the position of the long-run aggregate supply curve.

3. Option 3. the price level

Explanation: The verticle axis plots price level and the horizontal axis plots quantity.