3.5 Equilibrium in the Aggregate Demand-Aggregate Supply Model

Multiple Choice

Which of the following best describes short-run equilibrium in the aggregate demand-aggregate supply model?

• Where the AD and SRAS curves intersect

• Where the LRAS curve and AD curve intersect

• Where aggregate demand equals aggregate supply at all price levels

• Where the SRAS curve is vertical

Multiple Choice

Which event caused a leftward shift of the aggregate demand curve in the U.S. between 1929 and 1933?

• The oil price shock

• The Great Depression

• A technological boom

• A rise in government spending

Multiple Choice

The short-run equilibrium aggregate price level is the aggregate price level in the short-run macroeconomic ___ .

• equilibrium
• equestrian

• equator

• equidistant

Multiple Choice

How does the AD–AS model determines short-run macroeconomic equilibrium.

• Short-run equilibrium is found where the AD curve intersects the LRAS curve.
• The AD-AS model shows long-run economic growth through the LRAS curve.
• The AD-AS model determines short-run macroeconomic equilibrium at the intersection of the AD and AS curves.
• The AD-AS model indicates equilibrium at the highest point of the AS curve.

Multiple Select

Which of the following statements accurately describe the AD–AS model?

• It uses only the aggregate supply curve to analyze fluctuations.

• It uses both the aggregate supply and demand curves to analyze economy-wide fluctuations.

• It is used to study short-run macroeconomic equilibrium.

• It ignores aggregate demand in its analysis.

Multiple Choice

What happens to the economy when the short-run equilibrium output equals the long-run or potential output?

• The economy is in a recessionary gap.

• The economy is in long-run macroeconomic equilibrium.

• The aggregate supply curve shifts left.

• The aggregate demand curve shifts right.

Multiple Choice

What is the result when aggregate output falls below potential output?

• Inflationary gap

• Recessionary gap

• Long-run equilibrium

• Aggregate demand shock

Multiple Choice

What happens to the aggregate price level and aggregate output when the aggregate demand (AD) curve shifts right from AD1 to AD2 in the short-run aggregate demand-aggregate supply model?

• Both the aggregate price level and aggregate output decrease.

• The aggregate price level increases, but aggregate output remains the same.

• The aggregate price level increases and aggregate output increases, resulting in an inflationary gap.

• Aggregate output decreases while the aggregate price level increases.

Multiple Choice

What is the significance of the intersection between the AD (Aggregate Demand) and SRAS (Short-Run Aggregate Supply) curves in the aggregate demand-aggregate supply model?

• It represents the short-run equilibrium where aggregate quantity demanded equals aggregate quantity supplied.

• It shows the long-run equilibrium at full employment.

• It indicates a recessionary gap in the economy.

• It marks the point of maximum inflation.