Title: The Aggregate Demand-Aggregate Supply Model
Course: Macro Quiz Test

Q: In an AD-AS model:
- the potential GDP curve always slopes downwards from left to right.
- the price level is shown on the horizontal axis.
- real GDP is shown on the horizontal axis.
A: real GDP is shown on the horizontal axis.

Q: Which correctly describes the AD-AS model?
- The potential GDP curve always slopes downwards from left to right.
- Real GDP is shown on the vertical axis.
- The price level is shown on the vertical axis.
A: The price level is shown on the vertical axis.

Q: What accurately describes the AD-AS model?
- Real GDP is shown on the vertical axis and the price level is shown on the horizontal axis.
- Aggregate demand is show on the vertical axis and aggregate supply is shown on the horizontal axis.
- Price level is shown on the vertical axis and real GDP is shown on the horizontal axis.
A: Price level is shown on the vertical axis and real GDP is shown on the horizontal axis.

Q: Which of the following descriptions reflects the AD-AS model most accurately?
- Real GDP is shown on the vertical axis and the price level is shown on the horizontal axis.
- Aggregate supply is shown on the horizontal axis and aggregate demand is show on the vertical axis.
- Real GDP is shown on the horizontal axis and price level is shown on the vertical axis.
A: Real GDP is shown on the horizontal axis and price level is shown on the vertical axis.

Q: The economic model of aggregate demand curve and aggregate supply curve helps explain the
- three goals of economic policy which are economic growth, high inflation, and full employment.
- expansion and contractions in individual markets.
- shifts in real GDP and the price level.
A: shifts in real GDP and the price level.

Q: One of the goals of the economic model of aggregate demand curve and aggregate supply curve is to help explain the
- two goals of economic policy which are economic growth and full employment.
- contractions and expansions in individual markets.
- shifts in the price level and the real GDP.
A: shifts in the price level and the real GDP.

Q: If an economist needs to use a model that collectively reflects the interconnections and the entire market supply and demand relationships, which model is the best to use?
- The general equilibrium model.
- The cyclical unemployment model.
- The AD-AS model.
A: The AD-AS model.

Q: You have been given the task as a macroeconomist, to reflect the collective interconnections and relationships of the market as a whole (both the market supply and demand). To best capture this you choose the ________ model?
- general equilibrium
- cyclical unemployment
- AD-AS model
A: AD-AS model

Q: The Aggregate Supply curve shows
- the downward sloping relationship between price level and output for suppliers.
- the potential output of an economy at a given price level.
- the total quantity of output that firms will produce at a given price level.
A: the total quantity of output that firms will produce at a given price level.

Q: If you are looking at a graph where a cumulative upward sloping curve plots the relationship between price level and output for suppliers, you are looking at a
- microeconomic supply graph.
- aggregate demand curve graph.
- aggregate supply curve graph.
A: aggregate supply curve graph.

Q: As the aggregate price level in an economy rises, ________.
- real GDP increases
- aggregate demand increases
- aggregate supply increases
A: aggregate supply increases

Q: If the aggregate supply increases, the ________.
- real GDP decreases
- price level in an economy falls
- price level in an economy rises
A: price level in an economy rises

Q: Shifts in the aggregate supply curve can be caused by
- the wealth effect.
- the foreign price effect.
- technological innovation.
A: technological innovation.

Q: Shifts in the aggregate supply curve can be caused by
- the interest rate effect.
- the wealth effect.
- a change in input prices.
A: a change in input prices.

Q: Aggregate supply curves are ________ for low levels of output, and ________ for high levels of output.
- relatively flat; remain flat
- relatively steep; remain steep
- relatively flat; relatively steep
A: relatively flat; relatively steep

Q: Aggregate supply curves, for high levels of output, are ________ and ________ for low levels of output.
- relatively flat; remain flat
- relatively steep; remain steep
- relatively steep; relatively flat
A: relatively steep; relatively flat

Q: If an economy has aggregate price levels that are increasing, but the wage rate stays the same because of downward wage stickiness, what would be the economic consequences?
- Business would need to hire more employees and the quantity of real GDP supplied would increase.
- New businesses would enter the economy, hire employees and as a consequence the quantity of real GDP supplied would increase.
- Business would fire some employees as labor becomes too expensive and the quantity of real GDP supplied would decrease.
A: Business would fire some employees as labor becomes too expensive and the quantity of real GDP supplied would decrease.

Q: The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels?
- Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.
- Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.
- Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.
A: Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper.

Q: What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?
- GDP deflator
- aggregate supply
- potential GDP
A: potential GDP

Q: Using the context of an economy’s existing inputs, market and legal institutions, what term is used to describe the maximum quantity that an economy can produce?
- GDP deflator
- aggregate supply
- potential GDP
A: potential GDP

Q: In the long run, real GDP will
- be close to or the consumer price index.
- be close to or on the horizontal part of the AS curve.
- be close to or on the vertical part of the AS curve.
A: be close to or on the vertical part of the AS curve.

Q: In the long run, real GDP will
- be close to or the consumer price index.
- be close to or on the horizontal part of the AS curve.
- be close to or at its potential GDP.
A: be close to or at its potential GDP.

Q: Real GDP can pass potential GDP but only in the
- long run.
- intermediate run.
- short run.
A: short run.

Q: Potential GDP can be passed by real GDP only in the
- long run.
- intermediate run.
- short run.
A: short run.

Q: Which of the following statements is true concerning real GDP in the short run?
- Real GDP will equal potential GDP regardless of the price level.
- Real GDP will be independent of the price level.
- This is a period of time for real GDP when wages are sticky in response to a change in demand.
A: This is a period of time for real GDP when wages are sticky in response to a change in demand.

Q: Which of the following statements is true concerning real GDP in the long run?
- Real GDP will be dependent of the price level.
- This is a period of time for real GDP when wages are sticky in response to a change in demand.
- Real GDP will equal potential GDP regardless of the price level.
A: Real GDP will equal potential GDP regardless of the price level.

Q: Components of aggregate demand include all of the following EXCEPT
- government spending.
- investment spending.
- firms’ demand for inputs.
A: firms’ demand for inputs.

Q: Which component of aggregate demand would initially be affected by a change in exchange rates?
- government spending
- consumption
- net exports
A: net exports

Q: Aggregate Demand (AD) is defined as C + I + G + (X-M). C refers to ________.
- cost
- customers
- consumption spending
A: consumption spending

Q: Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.
- interest rates
- industry
- investment spending
A: investment spending

Q: Aggregate Demand (AD) is defined as C + I + G + (X-M). G refers to ________.
- guest workers
- gross investment
- government spending
A: government spending

Q: Aggregate Demand (AD) is defined as C + I + G + (X-M). X refers to ________.
- X factor
- exchange
- export expenditure
A: export expenditure

Q: Aggregate Demand (AD) is defined as C + I + G + (X-M). M = ________.
- investments
- income
- import expenditure
A: import expenditure

Q: What is the correct formula for calculating Aggregate Demand (AD)?
- C + X + G + (I-M)
- C + I + G + (M-X)
- C + I + G + (X-M)
A: C + I + G + (X-M)

Q: Due to the wealth effect, an increase in the price level will cause
- consumers’ savings to increase buying power.
- consumers to save less and spend more.
- consumer spending to decline.
A: consumer spending to decline.

Q: As interest rates rise, the effect on aggregate demand is to
- increase firm borrowing and investment spending.
- increase consumer borrowing and saving.
- reduce consumer borrowing and consumption spending.
A: reduce consumer borrowing and consumption spending.

Q: A fall in foreign prices relative to the price level in the U.S. will cause:
- U.S. net exports to rise.
- U.S. aggregate demand to fall.
- U.S. net exports to fall.
A: U.S. net exports to fall.

Q: An increase in foreign prices relative to the price level in the U.S. will cause:
- U.S. net exports to fall.
- U.S. aggregate demand to fall.
- U.S. net exports to rise.
A: U.S. net exports to rise.

Q: The aggregate demand represents total spending on ________.
- a nation’s total budget
- the total supply of domestic and imported goods
- a nation’s domestic output of goods and services
A: a nation’s domestic output of goods and services

Q: In macroeconomics, ________ denotes the total quantity of spending on domestic goods and services.
- aggregate supply (AS)
- potential GDP
- aggregate demand (AD)
A: aggregate demand (AD)

Q: The relationship between the total quantity of output or real GDP firms will produce and sell is known as
- market supply.
- aggregate demand.
- aggregate supply.
A: aggregate supply.

Q: In macroeconomics, ________ denotes the total quantity of output or the real GDP of what companies produce and sell.
- aggregate demand (AD)
- potential GDP
- aggregate supply (AS)
A: aggregate supply (AS)

Q: For aggregate demand and aggregate supply to be an economic model, the equilibrium aggregate price level and equilibrium aggregate real GDP should
- be considered in individual markets.
- only consider long run curves.
- intersect.
A: intersect.

Q: In order for there to be an accurate reflection of the aggregate economic indicators in a model the equilibrium aggregate real GDP and the equilibrium aggregate price level needs to
- be considered in individual markets.
- only use long run curves.
- intersect.
A: intersect.

Q: Which of the following will cause the aggregate demand curve to have a downward slope?
- The decrease in production costs.
- The level of employment.
- The foreign price effect.
A: The foreign price effect.

Q: Which of the following will affect the steepness of the aggregate supply curve?
- The foreign price effect.
- The wealth effect.
- The decrease in production costs.
A: The decrease in production costs.

Q: If equilibrium occurs in the flat range of the AS curve, then the:
- economy is producing at its potential GDP.
- price level is not stable.
- economy is experiencing unemployment.
A: economy is experiencing unemployment.

Q: If the AS-AD curves are in equilibrium in the vertical range of the AS curve, then:
- the economy is experiencing unemployment.
- there is not inflationary pressure on the price level.
- the economy is producing at or near its potential GDP.
A: the economy is producing at or near its potential GDP.

Q: Using the aggregate demand (AD)-aggregate supply (AS) model, the equilibrium occurs where
- the real GDP is above potential GDP.
- the real GDP is below potential GDP.
- the AD-AS are equal.
A: the AD-AS are equal.

Q: If the aggregate demand (AD)-aggregate supply (AS) model are equal
- the real GDP is above potential GDP.
- the real GDP is below potential GDP.
- equilibrium occurs.
A: equilibrium occurs.

Q: Considering the figure above, at what point does the equilibrium occur?
- The equilibrium point occurs at a price level of 20t and an output level of 105.
- The equilibrium point occurs at a price level of 103 and an output level of 30t.
- The equilibrium point occurs at a price level of 105 and an output level of 20t.
A: The equilibrium point occurs at a price level of 105 and an output level of 20t.

Q: Considering the figure above, at what point does the equilibrium occur?
- The equilibrium point occurs at a price level of 102 and an output level of 10.
- The equilibrium point occurs at a price level of 57 and an output level of 5.
- The equilibrium point occurs at a price level of 83 and an output level of 7.
A: The equilibrium point occurs at a price level of 83 and an output level of 7.

Q: Consider the following schedule to find where the equilibrium occur. Where does real GDP supplied and equilibrium price level occur?

Current Price Level | Real GDP-quantity demanded per trillion | Real GDP-quantity supplied per trillion
250 | 28.5 | 18.7
210 | 25.0 | 20.0
200 | 23.5 | 23.5
150 | 20.1 | 21.2
- The equilibrium point occurs at a price level of 210 and an output level of 25.0.
- The equilibrium point occurs at a price level of 150 and an output level of 20.1.
- The equilibrium point occurs at a price level of 200 and an output level of 23.5.
A: The equilibrium point occurs at a price level of 200 and an output level of 23.5.

Q: Consider the following schedule to find where the equilibrium occur. Where does real GDP supplied and equilibrium price level occur?

Current Price Level | Real GDP-quantity demanded per trillion | Real GDP-quantity supplied per trillion
785 | 20.0 | 13.0
610 | 17.8 | 17.8
500 | 15.5 | 19.0
478 | 12.0 | 21.7
- The equilibrium point occurs at a price level of 785 and an output level of 20.0
- The equilibrium point occurs at a price level of 478 and an output level of 12.0
- The equilibrium point occurs at a price level of 610 and an output level of 17.8
A: The equilibrium point occurs at a price level of 610 and an output level of 17.8

Q: On the far left side of the AS curve, the economy is producing ________ potential, and on the far right of the curve, it is producing ________ potential.
- above; below
- at; below
- below; above
A: below; above

Q: On the far right side of the AS curve, the economy is producing ________ potential, and on the far left of the curve, it is producing ________ potential.
- below; above
- at; below
- above; below
A: above; below

Q: If real GDP is greater than potential GDP then
- the unemployment rate is high and price levels are stable.
- the unemployment rate is at the natural rate and price levels are lowering.
- the unemployment rate is low and prices levels are rising.
A: the unemployment rate is low and prices levels are rising.

Q: If real GDP is less than potential GDP then
- the unemployment rate is low and prices levels are rising.
- the unemployment rate is at the natural rate and price levels are lowering.
- the unemployment rate is high and price levels are stable.
A: the unemployment rate is high and price levels are stable.

Q: If real GDP is close to or at potential GDP then ________ and if real GDP is not close to potential GDP then ________.
- equilibrium occurs in the flat range of AS; equilibrium occurs in the steep range of AS
- equilibrium occurs in the steep range of AD; equilibrium occurs in the flat range of AD
- equilibrium occurs in the steep range of AS; equilibrium occurs in the flat range of AS
A: equilibrium occurs in the steep range of AS; equilibrium occurs in the flat range of AS

Q: If real GDP is not close to potential GDP then ________ and if real GDP is close to or at potential GDP then ________.
- equilibrium occurs in the steep range of AS; equilibrium occurs in the flat range of AS
- equilibrium occurs in the steep range of AD; equilibrium occurs in the flat range of AD
- equilibrium occurs in the flat range of AS; equilibrium occurs in the steep range of AS
A: equilibrium occurs in the flat range of AS; equilibrium occurs in the steep range of AS

Q: Consider the following schedule. If the potential GDP is at 12.0, what can you conclude about price levels and the unemployment rate?

Current Price Level | Real GDP-quantity demanded per trillion | Real GDP-quantity supplied per trillion
120 | 17.0 | 8.0
115 | 15.0 | 15.0
110 | 13.0 | 12.0
100 | 10.0 | 11.2
- The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP.
- The economy has stable price levels and low unemployment because it is operating above the potential GDP.
- The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP.
A: The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP.

Q: Consider the following schedule. If the potential GDP is at 8.0, what can you conclude about price levels and the unemployment rate?

Current Price Level | Real GDP-quantity demanded per trillion | Real GDP-quantity supplied per trillion
120 | 17.0 | 8.0
115 | 15.0 | 15.0
110 | 13.0 | 12.0
100 | 10.0 | 11.2
- The economy has stable price levels and low unemployment because it is operating above the potential GDP.
- The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP.
- The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP.
A: The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP.

Q: Events that can cause a shift in the aggregate demand might include
- production inputs.
- technological innovation.
- loss of consumer confidence.
A: loss of consumer confidence.

Q: What might shift aggregate demand?
- Production inputs.
- Technological innovation.
- Loss of business confidence.
A: Loss of business confidence.

Q: One benefit to falling aggregate demand is that
- unemployment falls.
- unions lose clout.
- price levels go down.
A: price levels go down.

Q: An increase in aggregate demand would cause
- unemployment to rise.
- foreign investment to rise.
- the price levels to rise.
A: the price levels to rise.

Q: Typically, if consumer and business confidence is high then ________ and if consumer and business confidence is low then ________.
- AD shifts to the left; AD shifts to the right
- AD does not shift; AD shifts to the right
- AD shifts to the right; AD shifts to the left
A: AD shifts to the right; AD shifts to the left

Q: Typically, if consumer and business confidence is low then ________ and if consumer and business confidence is high then ________.
- AD shifts to the right; AD shifts to the left
- AD does not shift; AD shifts to the right
- AD shifts to the left; AD shifts to the right
A: AD shifts to the left; AD shifts to the right

Q: Which of the following would cause a negative demand shock (shift to the left) in aggregate demand?
- increased government spending
- production costs falling
- decreased availability of business capital
A: decreased availability of business capital

Q: Which of the following would cause a positive demand shock (shift to the right) in aggregate demand?
- decreased availability of capital stock.
- availability of social capital increasing.
- increased consumer confidence and spending.
A: increased consumer confidence and spending.

Q: If the government saw that consumer confidence was low, what step can it take to shift the AD to the right?
- The Federal Reserve can increase interest rates.
- Government can decrease its spending.
- Congress can pass tax cuts.
A: Congress can pass tax cuts.

Q: If the government saw that consumer confidence was high, what step can it take to shift the AD to the left?
- Congress can pass tax cuts.
- Government can increase its spending.
- The Federal Reserve can increase interest rates.
A: The Federal Reserve can increase interest rates.

Q: In the 1970s, the price of oil was extremely high. This shock caused a
- change in the slope of the aggregate supply curve.
- shift to the left in the aggregate demand curve.
- shift to the left in the aggregate supply curve.
A: shift to the left in the aggregate supply curve.

Q: During the winter of 2014/2015 oil prices dropped by a large percentage compared to the summer of 2014. By March 2015, what changed?
- There was a shift to the right in the aggregate demand curve.
- There was a shift to the left in the aggregate demand curve.
- There was a shift to the right in the aggregate supply curve.
A: There was a shift to the right in the aggregate supply curve.

Q: In the chart below concerning the shifts in aggregate supply, arrow A represents an economy that is moving in response to ________
- an decrease in input prices
- a decrease in consumer confidence
- a decrease in productivity
A: a decrease in productivity

Q: In the chart below concerning the shifts in aggregate supply, arrow B represents an economy that is moving in response to ________
- a decrease in productivity
- a decrease in consumer confidence
- an decrease in input prices
A: an decrease in input prices

Q: Aggregate supply (AS) denotes, while holding the price of inputs fixed, the ________ that firms choose to produce and ________.
- type of goods: the input price of raw materials
- total inputs: what types of goods
- price level for output; GDP
A: price level for output; GDP

Q: The term "full employment GDP" is synonymous with which of the following?
- aggregate GDP
- macroeconomic equilibrium
- potential GDP
A: potential GDP

Q: The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called
- real GDP.
- aggregate supply.
- potential GDP.
A: potential GDP.

Q: In the long run, the most important factor that shifts the aggregate supply curve is
- inflation.
- business confidence.
- technological change.
A: technological change.

Q: In the long run, the least important cause of shifts the aggregate supply curve is
- technological change.
- change in productivity.
- change in consumer spending.
A: change in consumer spending.

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.