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The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

a. reduce the quantity of goods and services purchasers will demand.
b. increase the economy's full-employment real GDP.
c. improve the overall efficiency of resource use.
d. not alter the economy's full-employment real GDP.

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Related questions

The graph below depicts an economy where a decline in aggregate demand has caused a recession. This economy's current level of real GDP (Y1) is below its long-run equilibrium, which is illustrated by the long-run aggregate supply curve (LRAS), and a price level (P1) below the equilibrium value of Pe. a. Without any fiscal policy, we expect the economy to eventually return to full employment on its own. Use the graph below to illustrate that process. Instructions: Use the tool provided 'New Curve' to plot the appropriate line (2 points total). After placing the curve, double click or tap the question marks next to it and choose whether to label the curve as AS1, LRAS1, or AD2 from the dropdown. b. Assume the government instead enacts fiscal policy to reduce the burden of the recession. Use the graph below to illustrate that process. Instructions: Use the tool provided 'New Curve' to plot the appropriate line (2 points total). After placing the curve, double click or tap the question marks next to it and choose whether to label the curve as AS1, LRAS1, or AD2 from the dropdown. c. When comparing the two options for restoring the economy to its full-employment level of output, the benefit of allowing the economy to return to full employment on its own, as seen in part a, is that: the economy will recover faster without fiscal policy. lower unemployment and higher real GDP are reached. full employment is reached with a higher price level. full employment is reached with a lower price level.

1. In the long run, when prices are perfectly flexible:

a. aggregate supply is vertical and a market economy is self-correcting.

b. a market economy cannot self-correct.

c. government will be required to set prices to maintain equilibrium.

d. changes in aggregate demand cause equilibrium real GDP to change.

 

2. An increase in household wealth when the SRAS curve is upward sloping:

a. leads to an increase in the price level but has no impact on real GDP

b. has no impact on the price level but leads to an increase in real GDP

c. leads to an increase in both the price level and real GDP

d. has no impact on the price level or real GDP

 

3. In the long run, continued increases in aggregate demand not matched by similar increases in aggregate supply will cause:

a. an increase in the full-employment level of real GDP

b. a recessionary gap

c. a decrease in the price level

d. an increase in the price level

 

4. The vertical long-run aggregate supply curve implies that:

a. changes in aggregate demand will not affect the price level

b. the short-run aggregate supply curve is also vertical

c. natural or full-employment real GDP does not depend on the price level, in the long run

d. natural or full-employment real GDP is the same as the equilibrium real GDP in the short run

 

5. A rightward shift of the long-run aggregate supply curve illustrates:

a. economic growth

b. a recessionary gap

c. an inflationary gap

d. a decrease in natural real GDP

 

6. When the economy is in a recessionary gap

a. there is a surplus of labor

b. there is a shortage of labor

c. it is producing a real GDP level that is greater than natural real GDP

d. the unemployment rate is less than the natural unemployment rate

 

7. If the actual unemployment rate is less than the natural unemployment rate:

a. a recessionary gap exists and wages are likely to rise

b. an inflationary gap exists and wages are likely to rise

c. a recessionary gap exists and wages are likely to fall

d. an inflationary gap exists and wages are likely to fall

 

8. An economy in long-run equilibrium is producing:

a. a level of real GDP that is greater than its natural real GDP

b. where both the price level and real output are maximized

c. a level of real GDP equal to its natural real GDP

d. in the vertical range of aggregate demand.

 

MACROECONOMICS

1. Which one of the following is not a determinant of aggregate demand?

a. Investment expenditure

b. Technology

c. Consumption expenditure

d. Net exports

2. An improvement in technology will?

a. Decrease aggregate demand

b. Increase aggregate demand

c. Increase aggregate supply

d. Decrease aggregate supply

3. Oil price changes in the mid 80's are an example of?

a. An exiernal supply shock increasing prices and reducing real income

b. An external supply shock decreasing prices and raising real income

c. An external supply shock increasing prices and reducing real in come

d. An external demand shock inceasing prices and reducing real in come

4. The oil shock in 1979-80 was an example of?

a. An external supply shock decreasing prices and increasing real income

b. An external supply shock increasing prices and decreasing real income

c. An external demand shock decreasing prices and real income

d. An external demand shock increasing prices and real income

5. Which one of the following does not cause the aggregate demand curve to slop downward?

a. Changes in relative prices between foreign and domestic goods

b. Wealth effect

c. Changes in real output

d. Changes in interest rate

6.Which one of the following is not determinant of aggregate supply?

a. Productivity

b. Disposal income

c. Capacity and investment plan

d. Cost and availability of resources

7. Which of the following relationship is correct?

a. Equilibrium employment and full employment may not be the same

b. Equilibrium employment and full employment are not related

c. Equilibrium employment and full employment are always the same

d. Equilibrium employment and full employment are never the same

8. Which of the following was not a factor limiting the severity of effects of the oil sopply shock of 1979-80?

a. Increase in use of alternative sources of energy

b. More efficient use of energy

c. Increased supplies of non-OPEC oil

d. More rapid worldwide economic growth

9. Which one of following does not cause the aggregate demand curve to slop downward?

a. Changes in relative prices between foreign and domestic goods

b. Interest rate changes

c. Wealth effect

d. Chnages in real output

10. With aggregate demand shocks?

a. teh aggregte supply curve moves up the aggregate demand curve and increases price and reduces real income

b. the aggregate demand curves moves up the aggregate supply curve and increases prices and real income

c. the aggregate demand curves moves down the aggregate supply curve and increases both prices and real income

d. the aggregate supply curve moves down the aggregate demand curve and reduces prices and increases in real income

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