The Short-Run Aggregate Supply Curve

In the long run, how do changes in aggregate demand affect the real GDP growth rate?

• It causes the real GDP growth rate to increase.

• It causes the real GDP growth rate to decrease.

• It does not change the real GDP growth rate.

• It causes the real GDP growth rate to fluctuate unpredictably.

Which equation accurately represents the dynamic version of the Quantity Theory of Money?

• Growth in Money Supply - Growth in Velocity = Inflation + Real GDP Growth

• Growth in Money Supply + Growth in Velocity = Inflation + Real GDP Growth

• Growth in Money Supply + Inflation = Growth in Velocity + Real GDP Growth

• Growth in Money Supply = Inflation + Real GDP Growth - Growth in Velocity

What is the economic term for prices and wages that do not immediately adjust to changes in spending?

• Flexible

• Elastic

• Sticky

• Volatile

When there is an increase in spending due to an increased money supply, what is the immediate effect on real output in the short run, assuming prices and wages are sticky?

• Real output decreases significantly.

• Real output remains unchanged.

• Real output increases temporarily.

• Real output increases permanently.

What is the immediate effect on an economy's inflation rate and real GDP growth when the money supply grows faster than expected?

• Both inflation and real GDP growth increase.

• Both inflation and real GDP growth decrease.

• Inflation increases, and real GDP growth decreases.

• Inflation decreases, and real GDP growth increases.

In the long run, what happens to an economy's real GDP growth rate after a sustained increase in aggregate demand?

• It permanently increases to a new higher level.

• It permanently decreases due to higher inflation.

• It returns to its original potential growth rate.

• It becomes unpredictable and volatile.

What is the short-term impact on an economy's inflation rate and real GDP growth when aggregate demand unexpectedly declines?

• Both inflation and real GDP growth increase.

• Inflation increases, and real GDP growth decreases.

• Both inflation and real GDP growth decrease.

• Inflation decreases, and real GDP growth increases.

When there is an unexpected decline in overall spending within an economy, what is a common short-term response from businesses?

• They increase production to meet future demand.

• They hire more workers to expand operations.

• They sell less, which may lead to reduced hiring or business closures.

• They raise prices to compensate for lower sales volume.