Question

QUICK CHECK multiple choice 1. When the economy goes into a recession, real GDP —and unemployment a. rises, rises b. rises, falls c. falls, rises d. falls, falls 2. Which of the following is shifted by a sudden crash in the stock market? a. the aggregate-demand curve b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve c. the long-run aggregate-supply curve, but not the short-run aggregate-supply curve d. both the short-run and the long-run aggregate- supply curves PART 7 SHORT-RUN ECONOMIC FLUCTUATIONS 3. Which of the following is shifted by a change in the expected price level? a. the aggregate-demand curve b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve c. the long-run aggregate-supply curve, but not the short-run aggregate-supply curve d. both the short-run and the long-run aggregate- supply curves 4. An increase in the aggregate demand for goods and services has a larger impact on output and a larger impact on the price level a. in the short run, in the long run h in the long run, in the short run c. in the short run, also in the short run d. in the long run, also in the long run 5. Which of the following causes stagflation? a. a leftward shift in the aggregate-demand curve b. a rightward shift in the aggregate-demand curve c. a leftward shift in the aggregate-supply curve d. a rightward shift in the aggregate-supply curve 6. The idea that economic downturns result from an inadequate aggregate demand for goods and services is derived from the work of which economist? a. Adam Smith b. David Hume c. David Ricardo d. John Maynard Keynes

Answer 1

1) Option C. Recession shifts AD to the left and reduces real GDP and price level. However since firm produce less, they layoff workers so unemployment rises

2) Option A. A stock market crash results in reducing wealth and consumer spending so AD shifts left.

3) Option B. This is because changes in expectations of prices will cause production decisions to change in the short run

4) Option A

5) Option C

6) Option D