6355 Lecture Notes - Lecture 11: Opportunity Cost, Human Capital, Potential Output

A. A decrease in aggregate supply can result in:

1. a recession
2. cost-push inflation
3. demand-pull inflation
4. unemployment 

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

1. the price level but reduce real GDP.
2. real GDP without raising the price level
3. the price level without affecting real GDP
4. both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

1. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
2. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
3. As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
4. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

Question 5 (1 point) Question 5 Unsaved
Along the Keynesian range of the aggregate supply (AS) curve, increases in aggregate demand
Question 5 options:

A) raise prices without increasing output.

B) result in higher unemployment.

C) expand output without causing inflation.

D) create stagflation.

Question 6 (1 point) Question 6 Unsaved
Which of the following would cause a leftward shift in the aggregate supply (AS) curve?
Question 6 options:

A) Lower-than-expected wage increases.

B) Lower oil prices.

C) Increase investment spending.

D) Greater government regulation.
Save
Question 7 (1 point) Question 7 Unsaved
In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in
Question 7 options:

A) demand-pull inflation.

B) cost-push inflation.

C) a disinflationary recession.

D) stagflation.
Save
Question 8 (1 point) Question 8 Unsaved
Suppose the economy is on the intermediate range of the aggregate supply (AS) curve. Which of the following would both increase real GDP and reduce the price level?
Question 8 options:

A) A decrease in aggregate demand.

B) A increase in aggregate demand.

C) A decrease in aggregate supply.

D) A increase in aggregate supply.
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Question 9 (1 point) Question 9 Unsaved

Which of the following events could cause aggregate demand to increase from AD1 to AD2 as shown in the diagram?

Question 9 options:

A)
Inflation.

B)
A tax decrease.

C)
Lower production costs.

D)
Lower autonomous investment

Save
Question 10 (1 point) Question 10 Unsaved

What impact will the increase in aggregate demand from AD1 to AD2 have on the economy?

Question 10 options:

A)
Cost-push inflation.

B)
Demand-pull inflation.

C)
Disinflationary expansion.

D)
Recession.

Question 2 (1 point)

[Question 2 Unsaved]
According to the interest rate effect, a higher price level results in higher interest rates, which in turn causes a fall in

Question 2 options:

A) consumption and investment.
B) the money supply.
C) government consumption expenditures.
D) net exports.

Question 3 (1 point)

[Question 3 Unsaved]
An increase in the price level reduces the purchasing power of households' cash and bank accounts, which in turn causes households to reduce their consumption expenditures. This argument is called the

Question 3 options:

A) substitution effect.
B) net exports effect.
C) interest-rate effect.
D) real balances effect.

Question 4 (1 point)

[Question 4 Unsaved]
To illustrate the classical argument that "supply creates its own demand," the aggregate supply (AS) curve should be drawn

Question 4 options:

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

Question 5 (1 point)

[Question 5 Unsaved]
Along the Keynesian range of the aggregate supply (AS) curve, increases in aggregate demand

Question 5 options:

A) raise prices without increasing output.
B) result in higher unemployment.
C) expand output without causing inflation.
D) create stagflation.

Question 6 (1 point)

[Question 6 Unsaved]
Which of the following would cause a leftward shift in the aggregate supply (AS) curve?

Question 6 options:

A) Lower-than-expected wage increases.
B) Lower oil prices.
C) Increase investment spending.
D) Greater government regulation.

Question 7 (1 point)

[Question 7 Unsaved]
In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in

Question 7 options:

A) demand-pull inflation.
B) cost-push inflation.
C) a disinflationary recession.
D) stagflation.

Question 8 (1 point)

[Question 8 Unsaved]
Suppose the economy is on the intermediate range of the aggregate supply (AS) curve. Which of the following would both increase real GDP and reduce the price level?

Question 8 options:

A) A decrease in aggregate demand.
B) A increase in aggregate demand.
C) A decrease in aggregate supply.
D) A increase in aggregate supply.

Question 9

Which of the following events could cause aggregate demand to increase from AD1 to AD2 as shown in the diagram?

Question 9 options:

A)

Inflation.

B)

A tax decrease.

C)

Lower production costs.

D)

Lower autonomous investment

Question 10 (1 point)

[Question 10 Unsaved]

What impact will the increase in aggregate demand from AD1 to AD2 have on the economy?

Question 10 options:

A)

Cost-push inflation.

B)

Demand-pull inflation.

C)

Disinflationary expansion.

D)

Recession.