MAC TUT11 - AD AS

Which of the following would cause a rightward shift in the Aggregate Demand (AD) curve?

• An increase in interest rates

• A decrease in consumer confidence

• An increase in government spending

• A decrease in Net Exports

Which of the following is a reason the Long-Run Aggregate Supply (LRAS) curve might shift to the right?

• An improvement in technology

• An increase in oil prices

• A decrease in productivity

• A fall in consumer spending

If the economy is operating below full employment and the government increases its spending, what is the likely short-run effect?

• AD shifts left, Y falls

• AS shifts right, P falls

• AS shifts left, Y rises

• AD shifts right, Y rises

What could cause both AD and SRAS to shift left at the same time?

• A tax cut and a fall in interest rates

• A decrease in input prices and strong consumer spending

• A rise in oil prices and a fall in consumer confidence

• An increase in productivity and an increase in investment

Suppose the price level falls but because of fixed nominal wage contracts, the real wage rises and firms cut back on production. This is a demonstration of the

• sticky-wage theory of the short-run aggregate supply curve.

• classical dichotomy theory of the short-run aggregate supply curve.

• misperceptions theory of the short-run aggregate supply curve.

• sticky-price theory of the short-run aggregate supply curve.

Stagflation occurs when the economy experiences

• rising prices and rising output.

• rising prices and falling output.

• falling prices and falling output.

• falling prices and rising output.

Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?

• Prices rise; output falls.

• Prices fall; output rises.

• Prices rise; output rises.

• Prices fall; output falls.

In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to

• Shift short-run aggregate supply to the right.

• Shift short-run aggregate supply to the left.

• Shift aggregate demand to the right.

• Shift aggregate demand to the left.

8. The natural rate of output is the amount of real GDP produced

• When there is no unemployment.

• When the economy is at the natural rate of investment.

• When the economy is at the natural rate of aggregate demand.

• When the economy is at the natural rate of unemployment.

According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause

• Prices to rise and output to rise.

• prices to fall and output to fall.

• Prices to rise and output to remain unchanged.

• Prices to fall and output to remain unchanged.