EC140 Midterm 2 Practice Questions

B heeconomycannotreturntopotentialoutputwithout t

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Unformatted text preview: d a temporary decrease in prices. a 28) onsider an AD/AS model in long-run equilibrium. An output gap, C caused by a leftward shift of the AD curve, would be eliminated if A) he AS curve shifted upward. t B) ages rose quickly. w C) ages and other factor prices fell quickly. w D) rices rose quickly. p E) eal national income decreased. r 29) onsider the basic AD/AS macro model. A negative AS shock will C ________ the price level and ________ output in the short run. In the long run, the price level will ________ and output ________. A) ncrease; decrease; decrease; will be restored to potential output i B) ncrease; increase; increase further; will be restored to potential i output C) ecrease; decrease; decrease further; will be restored to potential d output D) ecrease; decrease; decrease further; will decrease further d E) ncrease; decrease; increase further; will be restored to potential i output 26) ______ 27) ______ 28) ______ 29) ______ 8 FIGURE 24-3 30) efer to Figure 24-3. The economy cannot be in long-run equilibrium at R E1 because the 30) ______ A) * will increase due to an increase in the price level. Y B) S will shift to the right due to a decrease in the price level. A C) D1 curve will shift back to AD0 due to an increase in the price A level. D) S will shift to the left due to an increase in wages. A E) D1 curve will shift back to the left due to a fall in current A consumption. 31) efer to Figure 24-3. Following a positive demand shock that takes the R economy from E0 to E1, the movement of the economy from E1 to E2 indicates that A) n increase in the price level causes the AD curve to shift to the a left. B) he economy cannot return to potential output without t government intervention. C) he effect of a demand shock on Y will be reversed in the long run t when wages and prices are fully adjusted. D) n increase in the price level cau...
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