Keynesian and LRAS Quiz

What is Keynesian Aggregate Supply?

• Total demand of goods and services produced by an economy in the long run

• Total supply of goods and services produced by an economy in the short run

• Aggregate demand curve in the short run

• Total supply of goods and services produced by an economy in the long run

Explain the concept of Long-Run Aggregate Supply.

• LRAS is the level of real GDP that an economy can produce at full employment and full capacity utilization.

• LRAS is the short-term supply of goods and services in an economy.

• LRAS represents the total demand for goods and services in an economy.

• LRAS is the level of real GDP that an economy can produce at half employment.

What are some factors that can shift the Long-Run Aggregate Supply curve?

• Changes in Short-Run Aggregate Supply, changes in inflation rates

• Changes in technology, changes in the quantity and quality of resources, changes in institutional factors, changes in productivity

• Changes in demand, changes in government spending

• Changes in interest rates, changes in consumer preferences

How does Keynesian Aggregate Supply differ from Long-Run Aggregate Supply?

• Keynesian Aggregate Supply is horizontal/elastic in the short run, while Long-Run Aggregate Supply is vertical/inelastic.

• Keynesian Aggregate Supply is determined by real GDP, while Long-Run Aggregate Supply is determined by nominal GDP.

• Keynesian Aggregate Supply is upward sloping, while Long-Run Aggregate Supply is downward sloping.

• Keynesian Aggregate Supply is vertical/elastic in the short run, while Long-Run Aggregate Supply is horizontal/inelastic.

Discuss the relationship between LRAS and potential GDP.

• LRAS and potential GDP have no correlation

• LRAS represents the minimum output level of an economy

• Potential GDP is always higher than LRAS

• LRAS and potential GDP both represent the maximum sustainable output level of an economy.

What impact does a decrease in input prices have on LRAS?

• LRAS will shift to the right

• LRAS will shift to the left

• LRAS will remain unchanged

• LRAS will become vertical

How does technological progress affect LRAS?

• Technological progress shifts the LRAS curve to the left.

• Technological progress shifts the LRAS curve to the right.

• Technological progress has no impact on LRAS.

• Technological progress causes LRAS to fluctuate.

Explain the concept of LRAS shift factors.

• LRAS shift factors are related to short-term supply changes.

• LRAS shift factors are only applicable in the short run.

• LRAS shift factors do not impact the economy.

• LRAS shift factors are determinants that can cause the Long-Run Aggregate Supply curve to shift.

What role does government policy play in influencing LRAS?

• Government policy only affects SRAS

• Government policy can influence LRAS by affecting factors such as investment, technology, education, and infrastructure.

• Government policy can directly control LRAS

• Government policy has no impact on LRAS

Why is LRAS considered to be vertical in the long run?

• LRAS is vertical due to lack of government intervention and high inflation.

• LRAS is vertical due to underutilization of resources and high cyclical unemployment.

• LRAS is vertical due to overutilization of resources and deflationary pressures.

• LRAS is vertical due to full resource utilization and absence of cyclical unemployment or inflationary pressures.