Multiple Choice Questions:
1. Starting from long-run equilibrium, an increase in aggregate demand?
a. Causes an inflationary gap.
b. Results in a lower price level.
c. Increases unemployment.
d. Does all of the above.
e. Does b and c, but not a.
2. During the self-correction process after a fall in aggregate demand?
a. The price level increases and real output increases.
b. The price level increases and real output decreases.
c. The price level decreases and real output increases.
d. The price level decreases and real output decreases.
3. Which of the following can contribute to slowing the adjustment to a recessionary gap?
a. Efficiency wages
b. The minimum wage
c. Menu costs
d. All of the above
e. b and c, but not a
4. An unexpected increase in aggregate demand will?
a. Increase real wages in the short run but not the long run.
b. Increase real wages in the short run and long run.
c. Decrease real wages in the short run but not the long run.
d. Decrease real wages in the short run and long run.
5. If the economy was operating on a completely flat segment of the short-run aggregate supply curve, an increase in aggregate demand would
a. Increase real output and increase the price level.
b. Increase real output and decrease the price level.
c. Decrease real output and increase the price level.
d. Decrease real output and decrease the price level.
e. Do none of the above.
6. “In the long run, both wages and prices adjust freely to changes in demand and supply, and the economy will be at its full-employment level of real output.”?
a. Classical economists, but not Keynesian economists, would accept this statement.
b. Keynesian economists, but not classical economists, would accept this statement.
c. Both classical economists and Keynesian economists would accept this statement.
d. Neither classical economists nor Keynesian economists would accept this statement.
7. Which of the following statements is true?
a. The classical short-run aggregate supply curve gets steeper as real output increases.
b. The Keynesian short-run aggregate supply curve gets steeper as real output increases.
c. The classical long-run aggregate supply curve gets steeper as real output increases.
d. The Keynesian long-run aggregate supply curve gets steeper as real output increases.