How do fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP? Starting from a full-employment equilibrium, a decrease in aggregate demand and creates gap. O A. increases real GDP above potential GDP; an inflationary O B. decreases real GDP below potential GDP; an inflationary OC. increases real GDP above potential; a recessionary D. decreases real GDP below potential GDP; a recessionary short-run aggregate and the economy returns to a full-employment In the long run, the money wage rate supply equilibrium. OA. rises; increases OB. falls; decreases OC. rises; decreases O D. falls; increases

Price level (CPI) Exhibit 10A-6 Aggregate demand and supply model 250 200 150 100 50 0 2 E₂ 4 LRAS 6 SRAS₁ Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-6, the real GDP and price level (CPI) in long-run equilibrium will be: O a. $10 billion and 200. O b. $10 billion and 150. O c. $10 billion and 100. O d. $4 billion and 150. SRAS₂ AD₁ 8 10 12 14 15 16 17 Real GDP (billions of dollars per year) AD₂

2. The model of aggregate demand and supply represents O A. the relationship between the real Gross Domestic Product and the overall price level O B. the changes in Gross Domestic Product over time O C. the relationship between the inflation and unemployment rates O D. the changes in the price level over time

tion 6 According to aggregate supply and aggregate demand analysis, what happens to P (price level) and Q (GDP) if X increases? Oa. Prices decrease and GDP decreases. O b. Prices increase and GDP decreases. Oc Prices stay the same and so does GDP i AS and AD curves shift by the same amount O d. Prices increase and GDP increases. estion will save this response.

An economy has a recessionary gap. With no change in aggregate demand, how does the economy return to full employment? O A. The money wage rate rises, real GDP increases, and the price level falls. O B. The money wage rate falls, real GDP increases, and the price level rises. O C. The money wage rate falls, aggregate supply increases, and the price level falls. O D. The money wage rate rises, real GDP decreases, and the price level rises. -to ooloct vour answer.

Price Level LAS SAS, SAS, AD SAS, AD, AD, Real Output Refer to the graph. Suppose the economy is at SAS, and AD₂. What is a possible way the economy can return to potential output? What dynamic price level feedback effect could prevent the return to potential output? How would the dynamic price level feedback effect show up in the graph? O A decrease in asset prices in the economy; a decrease in asset prices would further decrease AD; a shift in AD from AD2 to AD3 O A decrease in material costs in the economy; a decrease in material costs would decrease AD; a shift in AD from AD2 to AD1 A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD3 A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD1

In the Aggregate Expenditure framework, which of the following government policy choices offer a possible solution to inflationary pressures? (Check all that apply.) Select all that apply: a. A reduction in taxes for businesses that increase investment. Ob. A major decrease in what the government spends on healthcare. O c. A decrease in military spending. O d. A tax increase on consumer income.

In order to shift the vertical aggregate supply curve to the left, which of the following would have to occur? O expansion of potential GDP O increase in productivity flexible wage and price adjustments O breakdown of key market institutions

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from and the government policy to eliminate this gap will the price level. real GDP and to A. an inflationary gap; increase; decrease a recessionary gap; decrease; decrease OC. a recessionary gap; decrease; increase B. D. an inflationary gap; decrease; increase OE. a recessionary gap; increase; increase

Assume the economy has positively sloped AS curve. A leftward shift of the AD curve will result in O A. a decrease in prices and no change in real GDP.OB. an increase in both real GDP and prices.O C.a decrease in both real GDP and pricesO D.an increase in prices and no change in real GDPO E.an increase in real GDP and no change in prices.OF. a decrease in real GDP and no change in prices.