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WorksheetsChanges in the Ad–As Model in the Short Run
Total questions: 12
Worksheet time: 12mins
Which of the following changes will necessarily cause inflation?
A decrease in aggregate demand and a decrease in short-run aggregate supply.
A decrease in aggregate demand and an increase in short-run aggregate supply.
A decrease in aggregate demand with no change in short-run aggregate supply.
An increase in aggregate demand and a decrease in short-run aggregate supply.
An increase in aggregate demand and an increase in short-run aggregate supply.
An economy is in long-run macroeconomic equilibrium. What will be the short-run effects of an increase in investment spending?
An increase in real output, an increase in unemployment, and a decrease in the price level
An increase in real output, an increase in unemployment, and an increase in the price level
An increase in real output, a decrease in unemployment, and an increase in the price level
A decrease in real output, a decrease in unemployment, and a decrease in the price level
A decrease in real output, a decrease in unemployment, and no change in the price level
Based on the diagram, which answer describes what will happen in the long-run adjustment process?
The natural rate of unemployment will increase.
Potential real GDP will increase
Aggregate demand will decrease
Short-run aggregate supply will increase
Wages and input prices will increase.
An economy is currently in short-run equilibrium, and real output is below the full-employment level of output. Which of the following market adjustments is most likely to occur in the long run?
The recessionary gap will create upward pressure on prices, shifting the aggregate demand curve to the left.
The existence of cyclical unemployment will increase consumption spending and increase real output.
Full-employment output will fall to equal the short-run equilibrium real output.
Nominal wages will fall, shifting the short-run aggregate supply curve to the right.
Input prices will increase as firms compete for labor and capital.
If there is an adverse (negative) short-run aggregate supply shock due to an increase in the price of natural resources and the government pursues no policy to address the supply shock, then which of the following will occur in the long run?
Nominal wages will fall with no change in the natural rate of unemployment.
Inflation will rise and nominal wages will fall.
Deflation will worsen and nominal wages will rise.
Aggregate demand will increase to restore full employment.
The long-run aggregate supply curve will shift right and increase unemployment.
Assume the countries of Ornania and Kumbagi are major trading partners. Ornania is currently in long-run macroeconomic equilibrium. As a result of a recession in its economy, Kumbagi decreases its demand for goods produced in Ornania. Which of the following will occur in Ornania in the short run?
The aggregate demand curve will shift to the right, causing the actual rate of unemployment to exceed the natural rate of unemployment.
The aggregate demand curve will shift to the left, resulting in an inflationary gap.
The aggregate demand curve will shift to the left, resulting in a recessionary gap.
The short-run aggregate supply curve will shift to the left, resulting in an inflationary gap.
The short-run aggregate supply curve will shift to the left, resulting in a recessionary gap.
According to the graph, which statement is true?
At point Z, the economy has cyclical unemployment.
At point Z, the economy is in long-run equilibrium but not in short-run equilibrium.
At point Y, the natural rate of unemployment is zero.
At point X, the economy is experiencing a recessionary gap.
At point X, there is no frictional unemployment.
Which statement describes the graph's short run equilibrium?
The economy is operating at full employment.
The economy is operating below full employment.
The economy is operating above full employment.
There will be downward pressure on the price level.
There is a recessionary gap.
In the AD-AS model, which of the following is true?
The economy is in an inflationary gap when the short-run equilibrium real output is below the long-run equilibrium real output.
The economy is in an inflationary gap when the short-run equilibrium real output is at the long-run equilibrium real output.
The economy is in a recessionary gap when the short-run equilibrium real output is at the long-run equilibrium real output.
The economy is in a recessionary gap when the short-run equilibrium real output is below the long-run equilibrium real output.
The economy is in a recessionary gap when the short-run equilibrium real output is above the long-run equilibrium real output.
Stagflation is most likely to be caused by
an increase in aggregate demand
a decrease in aggregate demand
an increase in aggregate supply
a decrease in aggregate supply
a large increase in the money supply
With an increase in the real interest rate, consumption and real gross domestic product will most likely change in which of the following ways?
Consumption increases, Real GDP increases
Consumption increases, Real GDP decreases
Consumption decreases, Real GDP increases
Consumption decreases, Real GDP decreases
Consumption has no change, Real GDP increases
An economy is currently in short-run equilibrium, and real output is below the full-employment level of output. Which of the following market adjustments is most likely to occur in the long run?
The recessionary gap will create upward pressure on prices, shifting the aggregate demand curve to the left.
The existence of cyclical unemployment will increase consumption spending and increase real output.
Full-employment output will fall to equal the short-run equilibrium real output.
Nominal wages will fall, shifting the short-run aggregate supply curve to the right.
Input prices will increase as firms compete for labor and capital.
