1. The SRAS is __________; the LRAS is __________.
a. upward sloping; upward sloping
b. upward sloping; vertical
c. vertical; upward sloping
d. vertical; vertical
2. If the nation experiences a technological breakthrough in theproduction process, then:
a. business costs will rise, profits will fall, and production willdecrease.
b. business costs will fall, but profits also will fall; productionwill remain at the pre-breakthrough level.
c. business costs will decline, improving profitability, andproduction will increase.
d. firms will make higher profits but will not increaseproduction.
3. Suppose that the saving rate in the United States increases, andfirms use the increased saving to invest. What will happen tolong-run aggregate supply?
a. The LRAS will not shift, but the economy moves along the LRAScurve to a higher price
b. The LRAS will not shift, but the economy moves along the LRAScurve to a lower price
c. It will decrease.
d. It will increase.
4. Educational reforms begin to significantly raise test scores ofgraduating high school seniors in the United States, and they enterthe workforce with improved reading, math, and reasoning skills.What effect would this have on aggregate supply?
a. It will shift the LRAS right, but not the SRAS.
b. It will shift the SRAS left, but not the LRAS.
c. It would shift both the SRAS and the LRAS right.
d. It will not shift either SRAS or LRAS.
5. A temporary increase in the supply of a major input will:
a. increase SRAS but not LRAS.
b. increase SRAS and LRAS.
c. decrease SRAS but not LRAS.
d. decrease SRAS and LRAS.
6. A permanent increase in the supply of a major input will:
a. decrease real output in the short run but not the long run.
b. decrease real output in both the short run and the long run.
c. increase real output in the short run but not in the longrun.
d. increase real output in both the short run and the long run.
7. If the government eliminated for only one year many of thecostly paperwork requirements imposed on businesses andindividuals,
a. SRAS would increase but LRAS would not.
b. SRAS and LRAS would both increase.
c. SRAS would decrease but LRAS would not.
d. SRAS and LRAS would both decrease.
8. An increase in aggregate demand will:
a. increase real output in both the short run and long run.
b. increase real output only in the short run.
c. increase real output only in the long run.
d. not increase real output in either the short run or the longrun.
9. When there is a recessionary gap,
a. real output exceeds the natural level of output and unemploymentexceeds its natural rate.
b. real output exceeds the natural level of output and unemploymentis less than its natural
c. real output is less than the natural level of output andunemployment exceeds its natural
d. real output is less than the natural level of output andunemployment is less than its natural
10. In a stagflation situation,
a. real output growth increases and the price level increases.
b. real output growth increases and the price level decreases.
c. real output growth decreases and the price level increases.
d. real output growth decreases and the price level decreases.
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