AD AS Model Quiz

What is the long-run equilibrium in the AD-AS model?

• When aggregate demand equals short-run aggregate supply

• When aggregate demand equals long-run aggregate supply

• When aggregate demand is greater than aggregate supply

• When aggregate demand is less than aggregate supply

In the long run, what determines the price level in the AD-AS model?

• Aggregate demand only

• Aggregate supply only

• Both aggregate demand and aggregate supply

• Government policies

What happens to the price level if aggregate demand increases in the long run?

• The price level decreases

• The price level remains constant

• The price level increases

• The price level fluctuates

Which of the following is true about long-run aggregate supply (LRAS)?

• It is upward sloping

• It is downward sloping

• It is vertical

• It is horizontal

What does the vertical LRAS curve indicate?

• Output is dependent on the price level

• Output is independent of the price level

• Output decreases as price level increases

• Output increases as price level decreases

In the long run, if the economy is producing at its potential output, what is the unemployment rate?

• Zero

• Below the natural rate

• At the natural rate

• Above the natural rate

What is the effect of a technological advancement on the long-run aggregate supply curve?

• It shifts the LRAS curve to the left

• It shifts the LRAS curve to the right

• It does not affect the LRAS curve

• It makes the LRAS curve steeper

How does an increase in the labour force affect the long-run aggregate supply?

• It decreases the LRAS

• It increases the LRAS

• It has no effect on the LRAS

• It makes the LRAS curve flatter

What is the primary focus of long-run adjustments in the AD-AS model?

• Adjusting short-run aggregate supply

• Achieving long-run equilibrium

• Controlling inflation

• Reducing unemployment

If the economy is initially in long-run equilibrium and there is a sudden increase in aggregate demand, what will happen in the short run?

• Output and price level both increase

• Output increases, price level decreases

• Output decreases, price level increases

• Output and price level both decrease