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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y<sub>2 (or at Point </sub><sub>D</sub><sub>) </sub> because A) the price of raw material and wages will decrease shifting the aggregate supply curve to AS<sub>2</sub>. B) the price of inputs will increase, shifting the aggregate supply curve to AS<sub>1</sub>. C) the price of raw material will decrease, shifting the aggregate demand curve to AD<sub>1</sub>. D) all of the above Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y2 (or at Point D) because


A) the price of raw material and wages will decrease shifting the aggregate supply curve to AS2.
B) the price of inputs will increase, shifting the aggregate supply curve to AS1.
C) the price of raw material will decrease, shifting the aggregate demand curve to AD1.
D) all of the above

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Refer to the information provided in Figure 11.2 below to answer the questions that follow. Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2. This economy reaches capacity at A) $300 billion. B) $600 billion. C) $900 billion. D) an output level that is indeterminate from this information because aggregate demand is not given. Figure 11.2 -Refer to Figure 11.2. This economy reaches capacity at


A) $300 billion.
B) $600 billion.
C) $900 billion.
D) an output level that is indeterminate from this information because aggregate demand is not given.

Correct Answer

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The rationale underlying policies to deregulate the economy is that these policies would


A) increase aggregate demand.
B) decrease short-run aggregate supply.
C) decrease aggregate demand.
D) increase short-run aggregate supply.

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Which of the following sequence of events follows an open market purchase by the Fed?


A) r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓
B) r↑ ⇒ I↑ ⇒ AE↓ ⇒ Y↑
C) r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑
D) r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↓

Correct Answer

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An increase in aggregate demand when the economy is operating at full capacity is likely to result in


A) an increase in both output and the overall price level.
B) an increase in output but no increase in the overall price level.
C) an increase in the overall price level but no increase in output.
D) no increase in either output or the overall price level.

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11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. 11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation A) is $800 million. B) is $700 million. C) is $400 million. D) cannot be determined from this information because aggregate demand is not given. Figure 11.7 -Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation


A) is $800 million.
B) is $700 million.
C) is $400 million.
D) cannot be determined from this information because aggregate demand is not given.

Correct Answer

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When the economy is producing at full capacity, the aggregate supply curve becomes


A) horizontal.
B) downward sloping.
C) vertical.
D) upward sloping.

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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point B producing output level Y<sub>1</sub> A) the economy is operating above full employment. B) input prices are likely to rise. C) aggregate supply shifts to the left and the economy ends up at Point C. D) all of the above Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point B producing output level Y1


A) the economy is operating above full employment.
B) input prices are likely to rise.
C) aggregate supply shifts to the left and the economy ends up at Point C.
D) all of the above

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Refer to the information provided in Figure 11.5 below to answer the questions that follow. Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in government spending shifts the ________ to the ________. A) IS curve; left B) Fed rule; right C) IS curve; right D) Fed rule; left Figure 11.5 -Refer to Figure 11.5. A decrease in government spending shifts the ________ to the ________.


A) IS curve; left
B) Fed rule; right
C) IS curve; right
D) Fed rule; left

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A decrease in the price level is likely to decrease the aggregate amount of output supplied in the short run because


A) interest rate is high in the short run.
B) wages are sticky in the short run.
C) wages change in the short run.
D) the aggregate supply curve is vertical in the short run.

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To increase the price level the government could


A) increase government spending and encourage immigration.
B) decrease government spending and discourage immigration.
C) increase government spending and discourage technological advancement.
D) decrease government spending and encourage technological advancement.

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An increase in the "Z" factors will decrease the equilibrium price level and decrease aggregate output, ceteris paribus.

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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused A) the short-run aggregate supply curve to shift from AS<sub>1</sub> to AS<sub>2</sub>. B) the short-run aggregate supply curve to shift from AS<sub>1</sub> to AS<sub>0</sub>. C) the economy to move from Point B to Point A along AS<sub>1</sub>. D) the economy to move from Point C to Point B along AS<sub>1</sub>. Figure 11.3 -Refer to Figure 11.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused


A) the short-run aggregate supply curve to shift from AS1 to AS2.
B) the short-run aggregate supply curve to shift from AS1 to AS0.
C) the economy to move from Point B to Point A along AS1.
D) the economy to move from Point C to Point B along AS1.

Correct Answer

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The relationship between the level of prices and the total demand for all goods and services is known as


A) aggregate supply.
B) aggregate demand.
C) market supply.
D) market demand.

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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in the price level moves the economy to Point A) E. B) B. C) C. D) D. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in the price level moves the economy to Point


A) E.
B) B.
C) C.
D) D.

Correct Answer

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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. The increased use of hydraulic fracturing, or fracking, in North Texas has significantly reduced energy prices across the country. This fracking would cause A) the short-run aggregate supply curve to shift from AS<sub>1</sub> to AS<sub>2</sub>. B) the short-run aggregate supply curve to shift from AS<sub>1</sub> to AS<sub>0</sub>. C) the economy to move from Point B to Point A along AS<sub>1</sub>. D) the economy to move from Point C to Point B along AS<sub>1</sub>. Figure 11.3 -Refer to Figure 11.3. The increased use of hydraulic fracturing, or fracking, in North Texas has significantly reduced energy prices across the country. This fracking would cause


A) the short-run aggregate supply curve to shift from AS1 to AS2.
B) the short-run aggregate supply curve to shift from AS1 to AS0.
C) the economy to move from Point B to Point A along AS1.
D) the economy to move from Point C to Point B along AS1.

Correct Answer

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All of the following shift the short-run aggregate supply curve except


A) a change in the price level.
B) a change in the price of oil.
C) a change in the price of raw material.
D) a change in wages as a result of a labor strike.

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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A? A) an oil embargo that increases the price of oil B) technological progress C) stricter immigration enforcement D) an increase in the price level Figure 11.4 -Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A?


A) an oil embargo that increases the price of oil
B) technological progress
C) stricter immigration enforcement
D) an increase in the price level

Correct Answer

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When the ________ increases, then potential output increases.


A) long-run aggregate supply
B) short-run aggregate supply
C) long-run aggregate demand
D) short-run aggregate demand

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A decrease in the price level raises the real value of wealth.

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