2A Review

Which of the following will happen if a country's government reduces business taxes?

• The short-run Phillips curve will shift to the right

• The short-run aggregate supply curve will shift to the right

• The long-run aggregate supply curve will shift to the left

• The aggregate demand curve will shift to the left

• The demand curve for loanable funds will shift to the left

Based on the graph above, demand-pull inflation is caused by a movement from

• SRAS1 to SRAS2

• SRAS2 ro SRAS1

• AD1 to AD2

• AD2 to AD1

• Yf to Y1

A decrease in consumer taxes will necessarily result in an increase in which of the following?

• Nominal gross domestic product

• Unemployment

• Exports

• Marginal propensity to save

• Money supply

As an indicator of an impending recession, inventories will most likely

• decrease as a result of a decrease in consumption

• increase as a result of a decrease in consumption

• increase as a result of a decrease in aggregate supply

• decrease as a result of an increase in aggregate supply

• remain constant as a result of economic uncertainty

If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely occur?

• Output will increase

• Output will decrease

• Output will not change

• The price level will increase

• The price level will decrease

An increase in which of the following would cause the aggregate demand curve to shift to the left?

• Consumer optimism

• Population

• Cost of resources

• Income taxes

• Net exports

With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely

• reduce the price level

• reduce the level of nominal gross domestic product

• increase real gross domestic product

• shift the short-run aggregate supply curve to the right

• shift both the aggregate demand curve and the long-run aggregate supply curve to the left

Which of the following are the most likely short-run effects of an increase in government expenditures?

• Unemployment Rate: Increase

  Inflation Rate: Increase

  Real GDP: Increase

• Unemployment Rate: Increase

  Inflation Rate: Increase

  Real GDP: Decrease

• Unemployment Rate: Decrease

  Inflation Rate: Increase

  Real GDP: Increase

• Unemployment Rate: Decrease

  Inflation Rate: Decrease

  Real GDP: Increase

• Unemployment Rate: No change

  Inflation Rate: Decrease

  Real GDP: Increase

Assume that an economy is currently in long-run equilibrium and the short-run aggregate supply curve is upward sloping. An adverse supply shock, such as a drought, will most likely cause which of the following to the economy in the short run?

• A decrease in the price level and a decrease in the nominal wage

• A decrease in the price level and an increase in the nominal wage

• An increase in the price level and an increase in the nominal wage

• An increase in the price level and an increase in the real wage

• An increase in the price level and a decrease in the real wage

Policies intended to reduce demand-pull inflation are most likely to increase which of the following in the short run?

• Gross domestic product

• The labor force participation rate

• The price level

• Unemployment

• Wage levels