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 invests heavily in infrastructure and technology, leading to an increase in its productive capacity. What is the likely effect on the LRAS curve?

Accepted Answer

The LRAS curve will shift to the right, indicating an increase in potential output.

Question 3

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

Accepted Answer

The substitution effect between labor and leisure.

Question 4

If the price level rises, which effect describes how higher prices reduce the real value of money holdings, leading to lower consumption?

Accepted Answer

Real-balance effect.

Question 5

Consider the following scenario: The U.S. government reduces taxes and consumers feel more secure about their jobs. What is the combined effect on aggregate demand?

Accepted Answer

Aggregate demand shifts to the right.

Question 6

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

Accepted Answer

A rise in real interest rates not due to price level changes.

Question 7

What is secular deflation?

Accepted Answer

A persistent decline in prices resulting from economic growth with stable aggregate demand.

Question 8

If the LRAS curve shifts rightward while the AD curve remains stationary, what happens to the equilibrium price level?

Accepted Answer

The equilibrium price level falls.

Question 9

Which of the following policies could help avoid secular deflation in a growing economy?

Accepted Answer

Increasing the money supply to match the growth in LRAS.

Question 10

In the context of aggregate demand, what is the effect of an increase in the foreign exchange value of the dollar?

Accepted Answer

Aggregate demand decreases due to lower net exports.

Question 11

Suppose Turkey experiences a 5% increase in real GDP and a 20% increase in the quantity of money in circulation. What is the likely outcome for the price level?

Accepted Answer

The price level will increase because aggregate demand grows faster than aggregate supply.

Question 12

Which of the following is a supply-side cause of inflation?

Accepted Answer

A decline in long-run aggregate supply due to reduced labor force participation.

Question 13

If aggregate demand increases for a given level of long-run aggregate supply, what must happen to the price level?

Accepted Answer

The price level must increase.

Question 14

Which equation best represents the condition for long-run equilibrium in the economy?

Accepted Answer

$$ AD = LRAS $$

Question 15

Japan’s government implemented a flexible workweek to reduce exhaustion and increase output per hour worked. What is the intended macroeconomic effect?

Accepted Answer

Increase long-run aggregate supply.

Question 16

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

Accepted Answer

A rise in real interest rates not due to price level changes.

Question 17

If the aggregate demand curve is derived for the entire economy, what does it represent?

Accepted Answer

Total planned expenditures on all goods and services.

Question 18

Which of the following scenarios would most likely result in persistent inflation?

Accepted Answer

Aggregate demand grows faster than long-run aggregate supply.

Question 19

Suppose the government increases the money supply at the same rate as the growth in LRAS. What is the expected effect on the price level?

Accepted Answer

The price level will remain constant.

Question 20

Which of the following is a plausible multi-step scenario leading to inflation in a real-world economy?

Accepted Answer

A country experiences rapid population growth, invests in technology, and increases the money supply faster than output growth.

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

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