Question 6 (1 point) Refer to the diagrams, in which AD1 and AS1 are the \"befor

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Question 6 (1 point)

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by:

Question 6 options:

panel (C) only.

panel (B) only.

panel (A) only.

panels (A) and (B).

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Question 7 (1 point)

The short-run aggregate supply curve represents circumstances where:

Question 7 options:

both input and output prices are fixed.

input prices are fixed, but output prices are flexible.

input prices are flexible, but output prices are fixed.

both input and output prices are flexible.

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Question 8 (1 point)

Other things equal, a reduction in personal and business taxes can be expected to:

Question 8 options:

increase both aggregate demand and aggregate supply.

decrease aggregate demand and increase aggregate supply.

decrease both aggregate demand and aggregate supply.

increase aggregate demand and decrease aggregate supply.

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Question 9 (1 point)

Investment spending in the United States tends to be unstable because:

Question 9 options:

capital goods are durable.

all of these contribute to the instability.

expected profits are highly variable.

innovation occurs at an irregular pace.

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Question 10 (1 point)

The investment demand curve will shift to the right as the result of:

Question 10 options:

an increase in business taxes.

businesses becoming more optimistic about future business conditions.

an increase in the real interest rate.

the availability of excess production capacity.

panel (C) only.

panel (B) only.

panel (A) only.

panels (A) and (B).

Explanation / Answer

6) A recession means decrease employment so the output is also reduced. Panel A and panel B show there is a decrease in output. Therefore the fourth option is correct

7) In short run, inputs are fixed so short-run aggregate supply represents input prices are fixed and both output prices are flexible. Therefore the second option is correct.

8) A reduction in tax increases the disposable income so the aggregate demand is increased. As a result, the price also increased so aggregate supply increases. Therefore the first option is correct.

9) Investment spending in the US tends to be unstable because the durability of capital goods, expected profits are highly variable, innovation occurs at an irregular pace. So the second option is correct.

10) The investment demand shifts to the right when investors become more optimistic about future business conditions.

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