Question : 81) The “long-run aggregate supply curve,” vertical at Y*, shows : 1384413

81) The “long-run aggregate supply curve,” vertical at Y*, shows that

A) potential output will rise as prices rise.

B) potential output will fall as prices rise.

C) potential output is compatible with any price level.

D) potential output is compatible with one particular price level.

E) prices will always rise in the long run.

82) Consider the AD/AS model. In the long run, after factor prices have fully adjusted to any output gaps, real GDP

A) and the price level are determined by aggregate demand.

B) and the price level are determined by “long-run aggregate supply.”

C) is determined by aggregate demand and the price level by potential output.

D) is determined by potential output and the price level by aggregate demand.

E) is determined by AD and the price level is determined by the AS curve.

83) Consider the AD/AS model. Since output in the long run is determined by Y*, the only role of the AD curve is to determine the price level. This is true because the

A) Y* is independent of the price level.

B) aggregate demand curve is vertical.

C) aggregate demand curve is horizontal.

D) Y* depends on the price level.

E) AS curve is upward sloping.

84) Consider the AD/AS model after factor prices have fully adjusted to output gaps. A reduction in the level of potential output, with aggregate demand constant, will

A) leave real output unaffected and increase the price level.

B) decrease real output and decrease the price level.

C) decrease real output and leave the price level unchanged.

D) decrease real output and increase the price level.

E) increase real output and decrease the price level.

85) Consider the AD/AS model after factor prices have fully adjusted to output gaps. An increase in the level of potential output, with aggregate demand constant, will

A) affect only the price level.

B) decrease real GDP and the price level.

C) affect only the level of real GDP.

D) increase real GDP and lower the price level.

E) decrease real GDP and raise the price level.

86) Refer to Figure 24-5. The economy is not in long-run equilibrium at E1 because the

A) AD1 curve will shift back to AD0 due to an increase in the price level.

B) AD1 curve will shift back to the left due to a fall in current consumption.

C) AS will shift to the left due to an increase in wages.

D) AS will shift to the left due to an increase in the price level.

E) AS will shift to the right due to a decrease in the price level.

87) Refer to Figure 24-5. Following a positive demand shock that takes the economy from E0 to E1, the movement of the economy from E1 to E2 indicates that

A) a demand shock can keep real GDP above potential output permanently.

B) an increase in the price level causes the AS curve to shift to the left.

C) an increase in the price level causes the AD curve to shift to the left.

D) the economy cannot return to potential output without government intervention.

E) the output effect of a demand shock will be reversed in the long run when wages and prices are fully adjusted.

88) Refer to Figure 24-5. If the economy is currently in equilibrium at E3, the concept of asymmetrical adjustment of the AS curve suggests that

A) the economy will attain potential output faster if there is no intervention by the government.

B) a decrease in the price level will induce a rightward shift of AS.

C) the return of the economy to potential output may be very slow without government intervention.

D) the economy will never return to potential output.

E) the price level is constant regardless of the level of equilibrium income.

89) Consider the AD/AS macro model. The study of short-run cyclical fluctuations usually assumes, for simplicity, that there are no changes in

A) the AS curve.

B) potential GDP.

C) either the AS curve or potential GDP.

D) either the AD or AS curves.

E) the intersection of the AD and AS curves.

90) In the long run in the AD/AS macro model we can say that

A) both real GDP and the price level are determined by aggregate demand.

B) both real GDP and the price level are determined by Y*.

C) long-run real GDP is determined by Y* and the long-run price level by the AD curve.

D) real GDP is determined by aggregate demand and the price level by Y*.

E) long-run real GDP is determined by aggregate demand and the price level is determined solely by the AS curve.