To reach general equilibrium the price level adjusts

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25. To reach general equilibrium, the price level adjusts to shift the _____ until it intersects with the _____. (a) IS curve; FE line and LM curve (b) FE line; LM and IS curves (c) LM curve; FE line and IS curve (d) ND curve; FE line and NS curve Answer: C Level of difficulty: 1 Section: 9.4 26. What adjusts to restore general equilibrium after a shock to the economy? 27. The IS-LM model predicts that a temporary beneficial supply shock 28. A temporary supply shock, such as a bumper crop, would 29. A temporary supply shock, such as an increase in oil prices, would (a) shift the IS curve down and to the left and leave the FE line unchanged. (b) shift the IS curve down and to the left and shift the FE line to the left. (c) shift the IS curve up and to the right, but leave the FE line unchanged. (d) have no effect on the IS curve. Answer: D Level of difficulty: 2 Section: 9.4
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138 Abel/Bernanke • Macroeconomics, Fifth Edition 30. You have just read that Australia has suffered a drought, destroying its wheat crop for this year. The effect of this adverse supply shock on Australia would probably be 31. A temporary adverse supply shock directly causes
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