According to the graph above, which of the following statements about the economy is true?
(A)The economy is in long-run equilibrium.
(B)The LRAS curve will automatically shift to the right, restoring long-run equilibrium.
(C)In the short run, if wages are sticky the SRAS will shift to the right, lowering prices.
(D)The economy is in a recession, requiring decreases in spending to restore full-employment.
(E)Wages will eventually decrease, restoring full-employment in the long run.
According to the graph above and starting with equilibrium point R, which of the following shifts identifies the short-run
and the long-run impact of demand-pull inflation?
(A)Short-Run = R to N ; Long-Run = M to N
(B)Short-Run = R to M ; Long-Run = R to N
(C)Short-Run = R to Q ; Long-Run = Q to N
(D)Short-Run = R to M ; Long-Run = R to Q
(E)Short-Run = R to N ; Long-Run = N to Q
The economy of a country is currently in equilibrium at point A in the diagram above. If the government does nothing
and wages are flexible, which of the following will most likely occur in the long-run?
(A)Falling wages will shift the aggregate demand curve to the right, producing full-employment.
(B)Rising wages will shift the aggregate demand curve to the right, producing full-employment.
(C)The economy will remain at point A.
(D)Rising wages will shift the aggregate supply curve to the right, producing full-employment.
(E)Falling wages will shift the aggregate supply curve to the right, producing full-employment.
According to the graph above, which of the following is true about the long-run equilibrium of the economy depicted?
(A)The economy is in long-run equilibrium.
(B)The aggregate demand curve will shift to the left to restore long-run equilibrium.
(C)The long-run aggregate supply curve will shift to the right to restore long-run equilibrium.
(D)Without a fiscal policy stimulus, the economy will remain in a recession.
(E)As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium.
An economy is in a short-run equilibrium at a level of output that is less than full-employment output. If there were no
fiscal or monetary policy interventions, which of the following changes in output and the price level would occur in the
long run?
(A)Output = Increase ; Price Level = Decrease
(B)Output = Increase ; Price Level = Increase
(C)Output = Decrease ; Price Level = Decrease
(D)Output = Decrease ; Price Level = Increase
(E)Output = No change ; Price Level = No change
In the long run, if aggregate demand decreases, real gross domestic product (GDP) and the price level will change in
which of the following ways?
(A)Real GDP = Decrease ; Price Level = Decrease
(B)Real GDP = Decrease ; Price Level = Increase
(C)Real GDP = No change ; Price Level = Decrease
(D)Real GDP = Increase ; Price Level = Decrease
(E)Real GDP = No change ; Price Level = Increase