1. Use the Aggregate Supply - Aggregate Demand model to determine which of the following will likely lead to inflation
a) a tax increase
b) a decrease in government spending
c) a decrease in interest rates
d) a decrease in world oil prices
2. Following a negative AS shock to the economy which of the following statements is most true?
a) Non-discretionary policies will shift AD to the right and return the economy to its pre-shock state.
b) Non-discretionary and fiscal policies together will shift the AD curve to the right and return the economy to its pre-shock state.
c) Non-discretionary and discretionary fiscal policies together will shift the AS curve to the right and return the economy to its pre-shock state.
d) Non-discretionary and discretionary policies will shift AD to the right and increase RGDP but may not be able to return the economy to its pre-shock state.