Short-run aggregate supply will change when a. Exports change b. Govemment spend

Question

Short-run aggregate supply will change when a. Exports change b. Govemment spending changes c. Input prices change d. Household spending changes 65.An increase in long-run aggregate supply is synonymous with a. Economic growth b. An increase in real GDP c. Inflation d. All of the above e. A and B above 66. Assuming an economy is in long-run equilibrium, a decrease in aggregate demand would have what short-run effect? a. The price level and real output would increase b. The price level and real output would decrease c. The price level would increase and real output would increase d. The price level would decrease and real output would increase 67.Assuming an economy is in long-run equilibrium, an increase in aggregate demand would likely have what short-run effect? a. Unemployment and inflation would increase b. Unemployment and inflation would decrease c. Unemployment would increase and inflation would increase d. Unemployment would decrease and inflation would increase 68. If an economy is experience a positive output gap, this implies that a. Real output has increased above the natural level, and the price level has increased b. Real output has decreased below the natural level, and the price level has increased c. Real output has increased above the natural level, and the price level has decreased d. Real output has decreased above the natural level, and the price level has decreased 69. If a positive output gap exists, the return to the natural level of output will occur because Interest rates will adjust and cause employment to rise b. a. Net exports will adjust and cause employment to decrease c. Input prices will begin to rise causing the output level to decline d. Government spending will adjust employment to the natural rate 70.As a result of the adjustment that occurs due to the positive output gap a. Aggregate supply will increase b. Aggregate supply will decrease c. Aggregate demand will increase d. Aggregate demand will decrease 71.If a negative output gap exists, which of the following may be appropriate, in the short-run? a. Monetary policy b. Fiscal policy Decreasing tax rates c. d. Increasing government spending e. All of the above

Explanation / Answer

664. Short run aggregate supply will change when input prices change .Because exports, government spending and hoisehold spending has the impact on aggregate demand. Therefore, option(c) is correct.

65. An increase in long-run aggregate supply is synonymous with Economic growth and an increase in real GDP. Therefore option (e) is correct.

66. Assuming an economy is in long-run equilibrium , a decrease in aggregate demand would have decrease the price level and increase in real GDP. This is we can see by drawing vertical supply curve and downward sloping demand curve , then when aggregate demand shifts downward ,this will decrease the price level and real output would increase. Hence Option (d) is correct. [The price level would decrease and real output would increase.]

67. Assuming an economy is in long- run equilibrium, an increase in aggregate demand would decrease unemployment and increase inflation. Hence option (d) is correct.[ Unemployment would decrease and inflation would increase]

68. If an economy is experience a positive output gap, this implies that real output has increased above the natural level and the price level has increased. Option(a) is correct.

69. If a positive output gap exists, the return to the natural level of ouput will occur because Government spending will adjust employment to the natural rate .Option(d) is coorect.

70. As a result of the adjustment that occurs due to the positive output gap will decrease the aggregate supply.Option (b) is correct.

71. If a negative output gap exists, then all of the above options may be appropriate in the short run. Option (e) is correct.

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