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What is the vertical line called on the AD/AS Model?

• short-run aggregate supply
• aggregate demand
• long run aggregate supply
• r GDP

What is a recessionary gap?

• when ouput falls below potential
• when output exceeds potentional
• when output increases
• when unemployment decreases

What is an inflationary gap?

• when output goes beyond full employment
• when output falls below full employment
• when unemployment increases
• when deflation is present in an economy

What would cause AD to decrease?

• an increase in taxes
• a decrease taxes
• an increase in government spending
• keeping government spending constant

The business cycle depicts:

• the phases a business goes through from when it first opens to when it finally closes.

• the evolution of technology over time.

• short-run fluctuations in output and employment.

• fluctuations in the general price level.

Alice's disposable income increases by $1,000, and she spends $600 of this increase in disposable income. For Alice, her:

• MPS is 0.40 and she saves $400.

• MPC is 0.40 and she saves $400.

• MPS is 0.40 and she saves $600

• MPC is 0.60 and she consumes $400.

• MPC is 0.60 and she consumes $1,000

Which of the following is always true of an
economy operating on its production possibilities
frontier?

• Its resources are fully employed.
• It is allocatively efficient.
• It cannot trade with other nations because it
  is the most efficient producer of tradeable
  goods.
• It will necessarily operate on the same frontier the following year.

In the aggregate demand-aggregate supply model, economic growth can best be represented by a

• leftward shift of the long-run aggregate
  supply curve
• rightward shift of the long-run aggregate
  supply curve
• rightward shift of the short-run aggregate
  supply curve
• rightward shift of the aggregate demand
  curve

Which of the following best describes an economy at full employment?

• The rate of unemployment is zero.
• There is only structural and cyclical
  unemployment.
• There is cyclical, but not structural,
  unemployment.
• There is frictional, but not cyclical,
  unemployment.

According to the graph above, which of the following statements about the economy is true?

• The economy is in long-run equilibrium.
• The LRAS curve will automatically shift to
  the right, restoring long-run equilibrium.
• In the short run, if wages are sticky the SRAS
  will shift to the right, lowering prices.
• Wages will eventually decrease, restoring full
  employment in the long run.