Multiple Choice Questions:
1. A temporary positive supply shock will shift ___________; a permanent positive supply shock will shift ___________.
a. SRAS and LRAS right; SRAS and LRAS right.
b. SRAS but not LRAS right; SRAS and LRAS right.
c. SRAS and LRAS right; SRAS but not LRAS right.
d. SRAS but not LRAS right; SRAS but not LRAS right.
2. A year of unusually good weather for agriculture would.
a. Increase SRAS but not LRAS.
b. Increase SRAS and LRAS.
c. Decrease SRAS but not LRAS.
d. Decrease SRAS and LRAS.
3. When the price of oil experiences a temporary sharp increase, which curve(s) will shift left?
a. SRAS
b. LRAS
c. neither SRAS nor LRAS
d. both SRAS and LRAS
4. Inflation that occurs as a result of a decrease in aggregate supply is called
a. Cost-push.
b. Demand-pull.
c. Inflationary push.
d. None of the above.
5. Assuming a constant level of aggregate demand, the short-run effects of an adverse supply shock include
a. An increase in the price level and a decrease in real output.
b. An increase in the price level and an increase in real output.
c. A decrease in the price level and an increase in real output.
d. A decrease in the price level and a decrease in real output.
6. Cost-push inflation occurs when
a. The aggregate demand curve shifts right at a faster rate than short-run aggregate supply.
b. The short-run aggregate supply curve shifts left, while aggregate demand is fixed.
c. The aggregate demand curve shifts left and aggregate supply is fixed.
d. The short-run aggregate supply curve shifts right.
7. A recession could result from
a. A decrease in aggregate demand.
b. An increase in long-run aggregate supply.
c. An increase in aggregate demand.
d. An increase in short-run aggregate supply.
e. None of the above.
8. When SRAS and AD intersect at the natural level of real output, it is
a. A short-run equilibrium and a long-run equilibrium.
b. A short-run equilibrium but not necessarily a long-run equilibrium.
c. Just a short-run equilibrium.
d. Not necessarily either a short-run equilibrium or a long-run equilibrium.