Aggregate Supply and Macroeconomic Equilibrium

The total quantity of goods and services produced in any economy at different prices levels is shown by the

• aggregate demand curve

• aggregate expenditures curve

• aggregate supply curve

• production possibilities curve

The short-run aggregate supply curve shows that

• as the price level falls, firms produce more output

• as the price level increases, firms produce less output

• as the price level increases, firms produce more output

• output produced by firms is independent of the price level

When short-run aggregate supply increases, the SRAS curve

• shifts upward

• shifts to the left

• shifts to the right

• remains constant

Which of the following can cause a rightward shift of the SRAS curve?

• a fall in input prices

• a rise in input prices

• an increase in costs of production

• a negative supply shock

The long-run aggregate supply curve

• is not affected by changes in aggregate demand

• is vertical at the level of potential or full employment output

• reflect the idea that, in the long run, output is independent of the price level

• all of the above

When equilibrium real GDP is less than the full employment level of real GDP, the economy is probably experiencing

• an inflationary gap

• inflation

• a deflationary gap

• a fall in unemployment

In the monetarist/new classical AD-AS model, an increase in aggregate demand can be expected to lead to

• an increase in the price level and a fall in real GDP

• a fall in the price level and an increase in real GDP

• an increase in the price level and an increase in real GDP

• a fall in the price level and a fall in real GDP

        In the AD-AS model, a decrease in SRAS can be expected to lead to:

• an increase in the price level and an increase in real GDP

• a fall in the price level and a fall in real GDP

• an increase in the price level and a fall in real GDP

• a fall in the price level and an increase in real GDP

        In the monetarist/new classical model, long run equilibrium occurs

• at full employment real GDP

• at potential output

• where the AD and SRAS curves intersect on the LRAS curve

• all of the above

        An inflationary gap is said to occur whenever

• the economy experiences inflation

• equilibrium real GDP is greater than full employment real GDP

• equilibrium real GDP is less than potential output

• there is an increase in unemployment