Question 1

Which of the following best describes the long-run aggregate supply (LRAS) curve?

Accepted Answer

A vertical line representing the real output of goods and services after full adjustment has occurred.

Question 2

Suppose a country experiences a technological breakthrough that increases productivity across all industries. What is the most likely effect on the LRAS curve?

Accepted Answer

The LRAS curve will shift to the right.

Question 3

Which of the following is NOT a reason why the aggregate demand (AD) curve slopes downward?

Accepted Answer

The law of diminishing marginal utility.

Question 4

If the price level in an economy rises, which of the following is most likely to occur according to the real-balance effect?

Accepted Answer

The real value of money balances decreases, leading to lower planned spending.

Question 5

Which of the following would cause a rightward shift in the aggregate demand curve?

Accepted Answer

A reduction in real interest rates (not due to price level changes).

Question 6

In the long run, if the aggregate demand curve is stationary and the LRAS curve shifts rightward due to economic growth, what happens to the equilibrium price level?

Accepted Answer

It falls.

Question 7

Which of the following best explains persistent inflation in a growing economy?

Accepted Answer

The AD curve shifts rightward faster than the LRAS curve.

Question 8

Suppose the government increases the money supply at a rate that matches the growth of long-run aggregate supply. What is the likely effect on the price level?

Accepted Answer

The price level will remain stable.

Question 9

Which of the following scenarios is an example of supply-side inflation?

Accepted Answer

A decline in labor force participation leading to a leftward shift in LRAS.

Question 10

If the price level in the United States rises relative to other countries, what is the likely effect according to the open economy effect?

Accepted Answer

U.S. exports will decrease and imports will increase.

Question 11

Which of the following equations correctly represents the condition for long-run equilibrium in the economy?

Accepted Answer

$$ AD = LRAS $$

Question 12

A country experiences a persistent decline in prices due to economic growth while aggregate demand remains stable. What is this phenomenon called?

Accepted Answer

Secular deflation

Question 13

Which of the following would NOT shift the long-run aggregate supply curve?

Accepted Answer

A change in the price level.

Question 14

If permafrost melting in Russia damages infrastructure and reduces productive capacity, what is the likely effect on the LRAS curve and equilibrium price level, assuming AD is constant?

Accepted Answer

LRAS shifts left, equilibrium price level rises.

Question 15

Which of the following is a plausible real-world example of demand-side inflation?

Accepted Answer

A rapid increase in the money supply leading to higher consumer and business spending.

Question 16

If the growth rate of the money supply in a country is 10% per year and the growth rate of real GDP is 3% per year, what is the likely long-run inflation rate, assuming velocity is constant?

Accepted Answer

$$ 7\% $$

Question 17

Which of the following best describes the difference between aggregate demand and the demand for a single good?

Accepted Answer

Aggregate demand shows total planned expenditures on all goods and services at various price levels.

Question 18

If the government increases taxes, what is the likely effect on the aggregate demand curve?

Accepted Answer

It shifts to the left.

Question 19

Which of the following is a key determinant of long-run economic growth and the rightward shift of the LRAS curve?

Accepted Answer

Growth in the productivity of labor and capital.

Question 20

Suppose Argentina's annual real GDP growth rate is 5%, but the money supply is growing at nearly 100% per year. What is the most likely macroeconomic outcome?

Accepted Answer

High inflation due to rapid outward shifts in aggregate demand.

Real GDP and the Price Level in the Long Run: Aggregate Supply, Aggregate Demand, and Inflation

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