AS/AD and Philips Curve

A negative aggregate supply shock will result in which of the following in the short run?

• An increase in the price level and a decrease in the unemployment rate

• A decrease in the price level and an increase in the unemployment rate

• A decrease in both the price level and real output

• An increase in both the price level and real output

• An increase in both the price level and the unemployment rate

An increase in the purchases of newly constructed houses will result in which of the following?

• Aggregate demand will decrease as a result of a decrease in the price level.

• Aggregate demand will increase as a result of an increase in investment spending.

• Aggregate demand will increase as a result of an increase in exports.

• Aggregate demand will not change, since consumer spending has not changed.

• Aggregate demand will not change, since investment spending has not changed.

In the short run, a reduction in the money supply will cause

• a rightward shift in the aggregate demand curve

• a leftward shift in the aggregate demand curve

• a rightward shift in the aggregate supply curve

• a leftward shift in the aggregate supply curve

• a movement along the aggregate demand curve

A country’s economy is currently in equilibrium at point R. Which of the following policy actions could the country’s government take to achieve potential output (YP) ?

• Decreasing the money supply

• Decreasing investment tax credits

• Increasing interest rates

• Increasing government expenditures

• Increasing the minimum wage

Which of the following is LEAST likely to affect the long-run growth of an economy?

• Investment in physical capital

• Research and development

• Education and training

• A specific tax on luxury goods

• Stable and efficient institutions

An economy experiences a sharp increase in energy prices, and policy makers adopt a stabilization policy to increase aggregate demand. Compared with the initial short-run equilibrium, which of the following will definitely occur?

• Lower level of output

• Higher level of output

• Lower price level

• Higher price level

• Higher aggregate supply

Assume that the marginal propensity to consume is 0.8. If the government increases its purchases of goods and services by $200 and exports decline by $50, at most the equilibrium level of income will

• decrease by $250

• decrease by $1,000

• increase by $150

• increase by $750

• increase by $1,250

If the short-run aggregate supply curve is upward sloping, which of the following will cause inflation?

• An increase in long-run aggregate supply

• An increase in short-run aggregate supply

• An increase in aggregate demand

• A decrease in aggregate demand

• A decrease in aggregate demand and an increase in aggregate supply

The economy is currently in long-run equilibrium. If the central bank increases the money supply, in the long run the price level will

• increase, and output will remain at the full-employment level

• increase, and output will be above the full-employment level

• increase, and output will be below the full-employment level

• remain unchanged, and output will remain at the full-employment level

• remain unchanged, and output will be above the full-employment level

Which of the following will occur in the money market when the aggregate price level increases?

• The money supply will increase and nominal interest rates will decrease.

• The demand for money will increase and nominal interest rates will decrease.

• The demand for money will increase and nominal interest rates will increase.

• The demand for money will decrease and nominal interest rates will decrease.

• The opportunity cost of holding money will decrease.