Question

 7) An increase in the price level will

 A) shift the aggregate demand curve to the left.

 B) shift the aggregate demand curve to the right.

 C) move the economy up along the aggregate demand curve.

 D) move the economy down along the aggregate demand curve.

 8) Expansionary monetary policy involves

 A) reducing money supply and lowering taxes

 B) increasing money supply to decrease interest rate

 C) increasing government spending and cutting money supply

 D) increasing the interest rate and increasing taxes

 9) Long-run macroeconomic equilibrium occurs when

 A) aggregate demand equals short-run aggregate supply.

 B) structural and frictional unemployment equals zero.

 C) output is at potential GDP.

 D) aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run

 supply curve.

 10) If the economy is growing beyond potential real GDP, which of the following would be an

 appropriate monetary policy to bring the economy back to long-run aggregate supply? A decrease in

 A) oil prices.

 B) discount rate.

 C) the money supply and a decrease in interest rates.

 D) taxes.

Answer 1

Q7) option C)

Since price level changes, so no shifting of AD happens

Only movement along AD curve

As P rises, we move upwards along AD , bcoz Q falls, & AD slopes downwards

8) option B)

Expansionary Monetary policy occurs, when Money supply rises,

So Money Demand curve unchanged, Ms curve shifts to right , interest rate falls

9) option D)

in Long run eqm , Current gdp = potential gdp

So AD cuts SRAS , at LRAS Curve

10) option C)

As Current Output level above potential level, so follow contractionary monetray policy

So decrease Money supply, that leads to rise in interest rates ,so Investment Spending falls

Or decrease in discount rate