26) Changes in the price level A) increase the level of aggregate supply in the
ID: 1206470 • Letter: 2
Question
26) Changes in the price level
A) increase the level of aggregate supply in the long run.
B) decrease the level of aggregate supply in the long run.
C) do not affect the level of aggregate supply in the long run.
D) increase the level of aggregate supply in the long run only at very high levels of output.
27) The long-run aggregate supply curve will shift to the right if the economy
A) experiences technological change.
B) has a decrease in population.
C) experiences high levels of inflation.
D) net exports decrease.
28) An increase in the price level will
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
29) Which of the following would cause the short-run aggregate supply curve to shift to the right?
A) an increase in the price level
B) a decrease in inflation expectations
C) a technological advance
D) an increase in interest rates
30) Refer to Figure 24-2. Ceteris paribus, an increase in the labor force would be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
C) point A to point B.
D) point B to point A.
31) Refer to Figure 24-2. Ceteris paribus, an increase in the price level would be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
C) point A to point B.
D) point B to point A.
32) The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of
A) automatic stabilizers.
B) discretionary fiscal policy.
C) discretionary monetary policy.
D) automatic monetary policy.
33) Which of the following is considered contractionary fiscal policy?
A) Congress increases the income tax rate.
B) Congress increases defense spending.
C) Legislation removes a college tuition deduction from federal income taxes.
D) The New Jersey legislature cuts highway spending to balance its budget.
34) Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
35) Which of the following is an appropriate discretionary fiscal policy if equilibrium real GDP falls below potential real GDP?
A) an increase in government purchases
B) an increase in the supply of money
C) an increase in individual income taxes
D) a decrease in transfer payments
Figure 24-2 SRAS Price level SRAS2 Real GDPExplanation / Answer
26. A) increase the level of aggregate supply in the long run.
27. C) experiences high levels of inflation.
28. A) shift the short-run aggregate supply curve to the left.
29. D) an increase in interest rates
30. D) point B to point A.
31. C) point A to point B.
32. C) discretionary monetary policy.
33.C) Legislation removes a college tuition deduction from federal income taxes.
34. C) lower; higher
35. B) an increase in the supply of money
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