Title: Economic growth, unemployment, and inflation in the AS/AD model
Course: TEST Course

Q: An AD/AS model that shows the equilibrium in a flat section of the aggregate supply curve suggests
- potential GDP is being met.
- potential GDP is being exceeded.
- the economy is in recession.
A: the economy is in recession.

Q: An AD/AS model showing equilibrium in the steep section of the aggregate supply curve suggests
- the economy is in recession.
- potential GDP is being exceeded.
- potential GDP is being met.
A: potential GDP is being met.

Q: In an AD/AS diagram, ________ could explain a rise in cyclical unemployment.
- a shift in AS to the right
- a shift in AD to the right
- a shift in AS to the left
A: a shift in AS to the left

Q: A ________ in an AD/AS diagram could explain a decrease in cyclical unemployment.
- shift in AS to the left
- shift in AD to the right
- shift in AS to the right
A: shift in AS to the right

Q: An increase in aggregate demand (AD) can cause
- a recession in the economy.
- an increase in cyclical unemployment.
- an expansion in the economy.
A: an expansion in the economy.

Q: A decrease in aggregate demand (AD) can cause
- an expansion in the economy.
- a decrease in cyclical unemployment.
- a recession in the economy.
A: a recession in the economy.

Q: If the economy is in an expansionary period, appropriate policies to pursue may include:
- an income tax cut that shifts the AD curve to the right.
- business investment incentives that shift the AD curve to the left.
- a reduction in government spending that shifts the AD curve to the left.
A: a reduction in government spending that shifts the AD curve to the left.

Q: If the economy is in a recessionary period, appropriate policies to pursue may include:
- a reduction in government spending that shifts the AD curve to the left.
- business investment incentives that shift the AD curve to the left.
- an income tax cut that shifts the AD curve to the right.
A: an income tax cut that shifts the AD curve to the right.

Q: In the AS-AD model, cyclical unemployment occurs when
- aggregate supply increases.
- the economy is not at a short run equilibrium in the AS-AD model.
- actual GDP falls below potential real GDP in the equilibrium of the AD and short-run AS curves.
A: actual GDP falls below potential real GDP in the equilibrium of the AD and short-run AS curves.

Q: In the AS-AD model, when actual GDP falls below potential real GDP in the equilibrium of the AD and short-run AS curves, then
- aggregate supply increases.
- the economy is not at a short run equilibrium in the AS-AD model.
- cyclical unemployment occurs.
A: cyclical unemployment occurs.

Q: Inflationary pressure in the AS-AD model can be shown as a
- supply shock that shifts the AD to the left.
- rise in input prices affecting most firms across the economy shifting AS curve to the right.
- rise in input prices affecting most firms across the economy shifting AS curve to the left.
A: rise in input prices affecting most firms across the economy shifting AS curve to the left.

Q: Inflationary pressure in the AS-AD model can be shown as a
- leftward shift of the AD curve when the economy is already producing at its potential GDP.
- supply shock that shifts the AS to the right.
- rightward shift of the AD curve when the economy is already producing at its potential GDP.
A: rightward shift of the AD curve when the economy is already producing at its potential GDP.

Q: If the economy is in a recession, appropriate policies to pursue may include
- a decrease in government spending that shifts the AD curve to the right.
- a reduction in research & development spending that shifts the AS curve to the left.
- an income tax cut that shifts the AD curve to the right.
A: an income tax cut that shifts the AD curve to the right.

Q: If the economy has cyclical unemployment, appropriate policies to pursue may include
- income tax cuts that shift the AS curve to the right.
- increased interest rates that shift the AS curve to the left.
- increased government spending that shifts the AD curve to the right.
A: increased government spending that shifts the AD curve to the right.

Q: Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then
- price levels will rise.
- output will rise.
- unemployment will rise.
A: unemployment will rise.

Q: With the economy at full employment, consumers and firms become more optimistic about the future economy and
- price levels will fall.
- unemployment will rise.
- output will rise.
A: output will rise.

Q: Economic growth is shown in the AS-AD model as a
- rightward shift in the AD curve.
- leftward shift in the short run AS curve.
- rightward shift in the long run AS curve.
A: rightward shift in the long run AS curve.

Q: In the AS-AD model depicting economic growth, the vertical line that represents potential GDP will
- gradually shift to the left in the long run.
- shift to the right in the long run AD curve.
- gradually shift to the right in the long run.
A: gradually shift to the right in the long run.

Q: Which of the following concepts describes an economy producing at its potential and unemployment at the natural rate of unemployment?
- fhe foreign price effect
- stagflation
- full employment GDP
A: full employment GDP

Q: ________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
- The foreign price effect
- The interest rate effect
- Full employment GDP
A: Full employment GDP

Q: Cyclical unemployment is shown on the aggregate demand-aggregate supply (AD-AS) diagram by
- how much the AD curve has moved past potential or full employment.
- the duration of the recession.
- how close the economy is to potential or full employment level of GDP.
A: how close the economy is to potential or full employment level of GDP.

Q: How does an economist depict cyclical unemployment on an aggregate demand-aggregate supply (AD-AS) diagram?
- By depicting how much the AD curve has moved past potential or full employment.
- By depicting the duration of the recession on the diagram.
- Showing how close the economy is to potential or full employment level of GDP.
A: Showing how close the economy is to potential or full employment level of GDP.

Q: Which of the following things are taken into consideration when using the aggregate demand-aggregate supply (AD-AS) model to illustrate growth and changes in the economy?
- Social capital and goodwill.
- The speed of change from expansions to recessions.
- Increased labor productivity.
A: Increased labor productivity.

Q: When using the aggregate demand-aggregate supply (AD-AS) model to illustrate growth and changes in the economy, which of the following things are considered?
- Social capital and goodwill.
- The speed of change from expansions to recessions.
- The efficiency of the capital and financial sector.
A: The efficiency of the capital and financial sector.