SRAS / LRAS

What does aggregate supply represent?

• The price level of goods and services

• The supply of a single good or service

• The demand of all goods and services in the economy

• The supply of all goods and services in the entire economy

Answer explanation

Aggregate supply represents the supply of all goods and services in the entire economy, not just a single good or service or the demand of all goods and services.

What happens to the quantity supplied when the price level goes up?

• It fluctuates unpredictably

• It increases

• It remains the same

• It decreases

Answer explanation

When the price level goes up, the quantity supplied increases as producers are willing to supply more at higher prices to maximize profits.

What is a shifter of the aggregate supply curve?

• Consumer preferences

• Change in the price of resources

• Government spending

• Interest rates

Answer explanation

A shifter of the aggregate supply curve is a change in the price of resources, which directly impacts the cost of production and influences the overall supply in the economy.

What does a change in technology affect in terms of aggregate supply?

• Increases it by allowing better use of resources

• Does not affect it

• Decreases it by making production more expensive

• Shifts the demand curve instead

Answer explanation

A change in technology increases aggregate supply by allowing better use of resources, leading to more efficient production processes.

What is capital stock?

• The amount of money invested in the stock market

• The stock of unsold goods

• The total value of goods produced in an economy

• The amount of factories and tools in the economy

Answer explanation

Capital stock refers to the amount of factories and tools in the economy, not the amount of money invested in the stock market, unsold goods, or the total value of goods produced.

What is a supply shock?

• An unexpected change in the price or availability of a key resource

• A government policy that unexpectedly affects supply

• A rapid change in technology

• A sudden increase in demand for goods and services

Answer explanation

A supply shock is an unexpected change in the price or availability of a key resource, causing disruptions in the supply chain.

What happens to the aggregate supply curve if nominal wages increase?

• Remains unchanged

• Shifts to the left

• Shifts to the right

• Becomes more elastic

Answer explanation

If nominal wages increase, the cost of production for firms increases, leading to a leftward shift in the aggregate supply curve.

How does an increase in physical capital affect the short run aggregate supply?

• Shifts to the left

• No effect

• Increases and shifts to the right

• Decreases and shifts to the left

Answer explanation

An increase in physical capital leads to higher productivity, causing the short run aggregate supply to increase and shift to the right.

What is the effect of a decrease in corporate taxes on aggregate supply?

• Increases and shifts to the right

• Shifts to the left

• Decreases and shifts to the left

• No change

Answer explanation

A decrease in corporate taxes leads to lower production costs for businesses, encouraging them to increase output. This results in an increase in aggregate supply, shifting it to the right.

What differentiates the short run aggregate supply curve from the long run aggregate supply curve?

• There is no difference between the two

• The short run curve is upward sloping while the long run curve is vertical

• The short run curve is downward sloping while the long run curve is vertical

• The short run curve is vertical while the long run curve is upward sloping

Answer explanation

The short run curve is upward sloping while the long run curve is vertical, indicating different responses to changes in price levels.