SOLVED

11) Under a favorable business environment and if the economic outlook of the future looked promising ________. A) firms might spend more for any given inflation rate B) planned investment might increase leading to a higher equilibrium level of output C) the aggregate demand curve would likely shift to the right D) all of the above E) none of the above 12) Which equation is a plausible aggregate supply curve? A) Y = 50 – 1.25Ï€ B) Ï€ = 2 + 0.3 (Y – 75) C) Y = 250 – 80r D) Ï€ = 5 – 0.4 (U – 6) E) none of the above 13) The endogenous variable in the aggregate supply curve is ________. A) output B) the real interest rate C) inflation D) planned expenditure E) none of the above 14) The assumption that in the long run prices and wages are fully flexible implies that the long-run aggregate supply curve is determined by ________. A) capital and labor inputs B) technology C) the natural rate of unemployment D) all of the above E) none of the above 15) The short-run aggregate supply curve shows how ________ cause output to rise. A) increases in inflation B) decreases in unemployment C) decreases in nominal interest rates D) all of the above E) none of the above 16) A change in the output gap is likely to lead to ________. A) a change in inflation B) a change in expected inflation C) a shift of the short-run aggregate supply curve D) all of the above E) none of the above 17) In the long run, we typically assume that ________. A) capital, labor, and technology are independent of the level of inflation B) the natural rate of unemployment is independent of the level of inflation C) aggregate supply is fixed and independent of the level of inflation D) all of the above E) none of the above 18) In the short run, as output rises above potential ________. A) inflation will fall from its current level which explains the upward-sloping nature of the Phillips curve B) inflation will rise from its current level which explains the upward-sloping nature of the aggregate supply curve C) unemployment will rise above the natural rate which explains the upward-sloping nature of both the Phillips curve and the AS curve D) all of the above E) none of the above 19) In the short run, ________. A) cost push shocks can cause firms to raise prices B) workers pushing for higher wages may lead to increases in inflation C) the aggregate supply curve may shift to the left with increases in expected inflation D) all of the above E) none of the above 20) In the short run, ________. A) when expected inflation rises, there is a movement up along the AS curve B) workers pushing for higher wages causes output to rise C) the aggregate supply curve may shift to the right with increases in output D) all of the above E) none of the above 21) How does the aggregate demand curve differ from a demand curve for, say, bananas? 22) How does the aggregate supply curve differ from a supply curve for, say, bananas?