Question 1

Which of the following would cause the aggregate demand (AD) curve to shift to the right?

Accepted Answer

An increase in government spending

Question 2

If the price level increases, what happens to the short-run aggregate supply (SRAS) curve?

Accepted Answer

Movement up along the SRAS curve

Question 3

Suppose the economy is experiencing stagflation. Which of the following best describes this situation?

Accepted Answer

AS shifts left and GDP falls

Question 4

If consumers suddenly become worried about losing their jobs, what is the most likely effect on the aggregate demand curve?

Accepted Answer

AD shifts left

Question 5

Which of the following is most likely to cause the short-run aggregate supply (SRAS) curve to shift to the left?

Accepted Answer

An increase in wages

Question 6

The long-run aggregate supply (LRAS) curve is determined by which of the following?

Accepted Answer

Capital, labor, and technology

Question 7

If the GDP is $10 billion and the equilibrium price level is increasing, where does the short-run aggregate supply curve intersect the aggregate demand curve?

Accepted Answer

At a GDP of $10 billion

Question 8

Which of the following would NOT lead to an increase in aggregate demand?

Accepted Answer

A decrease in government spending

Question 9

The Phillips Curve shows the relationship between which two variables?

Accepted Answer

Unemployment and inflation

Question 10

According to the long-run aggregate supply (LRAS), what happens to output when the price level increases?

Accepted Answer

Output remains unchanged

Question 11

If the aggregate demand curve shifts to the left, what is the most likely effect on GDP and the price level in the short run?

Accepted Answer

GDP falls and price level falls

Question 12

Which of the following equations represents the aggregate demand in an economy?

Accepted Answer

$$AD = C + I + G + NX$$

Question 13

If the short-run aggregate supply curve shifts right, what is the most likely effect on the economy?

Accepted Answer

GDP rises and price level falls

Question 14

Which of the following is a likely result of a negative supply shock?

Accepted Answer

AS shifts left, price level rises

Question 15

Which of the following would cause both the price level and GDP to fall?

Accepted Answer

AD shifts left

Question 16

If the economy is at full employment and aggregate demand increases, what is the most likely short-run effect?

Accepted Answer

Price level rises

Question 17

Which of the following best describes the long-run equilibrium in the aggregate demand and aggregate supply model?

Accepted Answer

AD, SRAS, and LRAS all intersect at the same point

Question 18

If the government increases spending while the economy is below full employment, what is the most likely effect?

Accepted Answer

AD shifts right, GDP rises

Question 19

Which of the following would most likely cause the aggregate demand curve to shift left?

Accepted Answer

A decrease in government spending

Question 20

If the short-run aggregate supply curve shifts left and aggregate demand remains unchanged, what is the most likely outcome?

Accepted Answer

Stagflation: higher price level and lower GDP

Aggregate Demand and Aggregate Supply: Key Concepts and Applications

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