11. (Figure: Shifting the AD and SRAS) LRAS SRAB AD, 0 Aggregate Output (Q) Assu
ID: 1128589 • Letter: 1
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11. (Figure: Shifting the AD and SRAS) LRAS SRAB AD, 0 Aggregate Output (Q) Assume the economy depicted in the figure above is in long-run equilibrium, where the aggregate demand curve is ADo and the short-run aggregate supply curve is SRASo. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a and a movement to a short-run equilibrium at point rightward shift in ADi; c rightward shift in SRAS2; A) B) C) leftward shift in SRAS2; a D) leftward shift in ADi; a 12. The exchange rate system that results in the greatest amount of fluctuation in currency values is A) dollarization. B) floating exchange rates. C) the gold standard. D) pegged exchange rates. 13. When the Fed wants to decrease the money supply, it will: A) lower taxes. B) buy bonds. C) lower the federal funds rate. D) sell bondsExplanation / Answer
Answer 11 – (C) Starting in long-run equilibrium when the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0, if there is a supply shock, such as a drastic increase in the price of oil, this will cause a leftward shift of SRAS and a movement to a short-run equilibrium from d to a
Answer 12 - (B) Floating exchange rates allows the currency to fluctuate to response to foreign exchange market as they incorporate the supply and demand of two currencies, adjusted for inflation, interest rates differentials, technical support and much more.
Answer 13 - (D) The federal open market committee that is part of the Federal Reserve can sell government securities to decrease money supply.
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