4. .Imagine that the economy is at the intersection of LRAS, SRAS and AD curves.

ID: 1163133 • Letter: 4

Question

4. .Imagine that the economy is at the intersection of LRAS, SRAS and AD curves. If M is increased what happens to prices?

a. They are unchanged in the SR and rise in the LR along the AD

b. They rise in the SR

c. They are unchanged in the SR and fall in the LR along the AS

d. None of the above

5. Imagine that the economy is at the intersection of LRAS, SRAS and AD curves. If M is decreased what happens to output ?

a. They are unchanged in the SR and rise to the LR level along the AD

b. They fall in the SR and fall to the LR level along the AD

c. They rise in the SR and fall to the LR level along the AD

d. They fall in the SR and rise to the LR level along the AD

6. Statement 1: In the Keynesian view, C+I+G is the planned expenditure which matches actual expenditure only at the equilibrium.

Statement 2: In the Keynesian view, C+I+G is the actual expenditure which matches planned expenditure always at all levels of Y.

a. Statement 1 is true, Statement 2 is true.

b. Statement 1 is true, Statement 2 is false.

c. Statement 1 is false, Statement 2 is true.

d. Statement 1 is false, Statement 2 is false.

a) IF the money supply or M is increased the demand increases in the short run, with a higher demand the price will also increase. The answer is "B".

b) "D"

A decreased money supply will decrease output in the short run and increase in the long run along with an increase in the AD.

c) Both the statements are true. The answer is "A".

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.