1. Which of the following represent the threeconsequences of the decline in demand during the Great Depression?
fall inprices, decline in output, and a surge inunemployment
rise inprices, decline in output, and a surge inunemployment
rise inprices, increase in output, and a surge inunemployment
fall inprices, increase in output, and a surge in unemployment
2. The short-run aggregate supply curve ispositively sloped because ______.
businesspeople suffer from money illusion
wages aresticky or don't readily adjust to changes in economic conditions inthe short run
workers careabout nominal wages, not real wages
ofdiminishing returns to labor
3. In the long run, the aggregate price levelhas ______.
no effect onthe quantity of aggregate output
a positiveeffect on the quantity of aggregate output
a negativeeffect on the quantity of aggregate output
an impact onaggregate output but no impact on employment
4. Producing a short-run level of aggregateoutput that exceeds the economy's potential output results in_______.
a downwardadjustment in nominal wages
an upwardadjustment in profits per unit of output
a downwardadjustment in production costs
an upwardadjustment in nominal wages
5. According to the wealth effect, whenprices decrease, the purchasing power of assets ______. (Points:1)
decreasesand consumer spending decreases
increasesand consumer spending decreases
decreasesand consumer spending increases
increasesand consumer spending increases
6. An increase in government spending onhealth care is likely to shift the ______.
short-runaggregate supply curve to the right
short-runaggregate supply curve to the left
aggregatedemand curve to the right
aggregatedemand curve to the left
7. A negative short-run supply shock ______.
reducesaggregate output and increases the aggregate pricelevel
increasesaggregate output and reduces the aggregate pricelevel
reducesaggregate output and the aggregate price level
increasesaggregate output and the aggregate price level
8. Suppose that the economy is in long-runmacroeconomic equilibrium and aggregate demand increases. Asthe economy moves to short-run macroeconomic equilibrium , there is______.
arecessionary gap with high inflation
arecessionary gap with low inflation
aninflationary gap with high unemployment
aninflationary gap with low unemployment
9. In the long run, inflationary andrecessionary gaps are self-correcting because, eventually ______.
nominalwages rise and fall in order to close an inflationary or arecessionary gap
thegovernment applies the right combination of fiscal and monetarypolicies
themultiplier compensates the negative supply or demandshocks
nominalwages rise and fall in order to widen a recessionary or aninflationary gap.
10. A increase in energy prices will _______.
decreaseshort-run aggregate supply
decreasethe quantity of aggregate output supplied in the shortrun
decreaseaggregate demand
increasethe quantity of aggregate output demanded