5. The slope of the short-run aggregate supply curve shows that a. as overall pr

Question

5. The slope of the short-run aggregate supply curve shows that a. as overall price levels increase, firms are willing to produce more b. as overall price levels decrease, firms are willing to produce more c. firms are constrained to a certain level of output in the short run, regardless of the price d. firms are constrained to a certain price in the short run, regardless of level of output. 6. In the long run, if the prices of goods and services paid by consumers increase a. the long-run aggregate supply will increase b. the long-run aggreg c. the long-run aggregate supply will stay the same d. the long-run aggregate demand will increase ate supply will decrease 7. If a positive permanent supply shock were to occur, the resulting equilibrium would be: a. a higher level of output and prices. b. a lower level of output and prices. c. a higher level of output at lower prices d. a lower level of output at higher prices 8. If the government increases the income tax rate, consumers: a. have less to spend and will reduce their consumption b. have more to spend and will reduce their consumption. c. have less to spend and will increase their consumption. d. have more to spend and will increase their consumption.

Explanation / Answer

5)

In short run supply curve is upward sloping and it is positively related to the price level.

Hence, right answer is: (A)

6)

Supply does not change with change in price level in long run. Hence, prices of goods and services increase:

The long run aggregate supply will stay the same.

Right answer is (C)

7)

Right answer is (D)

Supply shock depresses quantity and increases price level.

8)

Right answer is (a)

Taxes reduce the income of consumer, hence they tend to reduce the demand for consumption.

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