ECON-252 Exam 2 Questions with Correct Answers (Grade A+)
Question 1: What factors affect the Long-Run Aggregate Supply curve?
Answer: s.P.E.N.T - savings, productivity, education, numnber of resources, and technology Quiz answers:
Total Factor Productivity Labor Human Capital Physical Capital Technology
Question 2: An increase in the price level causes a _______ the Aggregate Demand curve.
Answer: movement up along
Question 3: What factors affect the Aggregate Demand curve?
Answer: Consumption, Investments, Government Purchases, Imports, and Exports
Question 4: Which of the following would shift aggregate demand to the left? Choose all that apply.
A) Increasing consumer confidence.
B) Increasing imports.
C) Increasing taxes.
D) Increasing exports.
Answer: B) Increasing imports.
C) Increasing taxes.
Question 5: A decrease in consumer spending causes the _____ curve to shift to the ____.
Answer: Aggregate Demand, Left
Question 6: An increase in capital accumulation causes the price level to _____ in the long run and
potential real GDP to ________.
Answer: Decrease, Increase
Question 7: Which of the following causes the price level to increase in the long run and real potential
GDP to decrease? A(n)
A) decrease in the labor-force participation rate.
B) increase in household taxes.
C) increase in productivity.
D) decrease in interest rates.
Answer: A) decrease in the labor-force participation rate.
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, Question 8: What would be the effect of a hurricane that damages buildings and roadways in the Gulf
Coast? LRAS _________ . AD _________ . The price level _______ . GDP _________.
Answer: Shifts left, does not change, increases, decreases
Question 9: Using the AD-LRAS model, a decrease in capital accumulation and a decrease in business
taxes causes the Long-Run Aggregate Supply curve to ___________ and the Aggregate Demand curve
to _________, respectively.
Answer: Shift left, Shift right
Question 10: One explanation for rigid (sticky) prices according to Keynes and others is flexible wages.
long-term labor contracts. inflation. government intervention.
Answer: long-term labor contracts.
Question 11: What is the shape of the short run aggregate supply for the AD-AS model used in class?
Upward sloping curve Horizontal line Downward sloping curve Vertical line
Answer: Upward sloping curve
Question 12: Which characteristics are associated with the Keynesian theory? Choose all that apply.
Long-run aggregate supply primarily affects economic growth (real GDP) Long-run view Inflexible
prices Short run view Flexible prices Aggregate demand primarily affects economic growth (real GDP)
Answer: Inflexible prices Short run view Aggregate demand primarily affects economic growth (real GDP)
Question 13: Which affect both the long-run and short-run aggregate supply curves? Choose all that
apply. Technology Net Exports Government Purchases Productivity Quantity of Labor Consumption
Investment Human Capital
Answer: Technology Productivity Quantity of Labor Human Capital
Question 14: Which only affects short run aggregate supply? Choose all that apply. Technology
Number of resources Inflationary expectations Input prices Saving
Answer: Inflationary expectations Input prices
Question 15: What happens when investment taxes decrease for the AD-AS model used in class?
Choose all that apply. Real GDP decreases. A recessionary gap occurs. The price level decreases. The
price level increases. Real GDP increases. An inflationary gap occurs.
Answer: The price level increases. Real GDP increases. An inflationary gap occurs.
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Question 1: What factors affect the Long-Run Aggregate Supply curve?
Answer: s.P.E.N.T - savings, productivity, education, numnber of resources, and technology Quiz answers:
Total Factor Productivity Labor Human Capital Physical Capital Technology
Question 2: An increase in the price level causes a _______ the Aggregate Demand curve.
Answer: movement up along
Question 3: What factors affect the Aggregate Demand curve?
Answer: Consumption, Investments, Government Purchases, Imports, and Exports
Question 4: Which of the following would shift aggregate demand to the left? Choose all that apply.
A) Increasing consumer confidence.
B) Increasing imports.
C) Increasing taxes.
D) Increasing exports.
Answer: B) Increasing imports.
C) Increasing taxes.
Question 5: A decrease in consumer spending causes the _____ curve to shift to the ____.
Answer: Aggregate Demand, Left
Question 6: An increase in capital accumulation causes the price level to _____ in the long run and
potential real GDP to ________.
Answer: Decrease, Increase
Question 7: Which of the following causes the price level to increase in the long run and real potential
GDP to decrease? A(n)
A) decrease in the labor-force participation rate.
B) increase in household taxes.
C) increase in productivity.
D) decrease in interest rates.
Answer: A) decrease in the labor-force participation rate.
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, Question 8: What would be the effect of a hurricane that damages buildings and roadways in the Gulf
Coast? LRAS _________ . AD _________ . The price level _______ . GDP _________.
Answer: Shifts left, does not change, increases, decreases
Question 9: Using the AD-LRAS model, a decrease in capital accumulation and a decrease in business
taxes causes the Long-Run Aggregate Supply curve to ___________ and the Aggregate Demand curve
to _________, respectively.
Answer: Shift left, Shift right
Question 10: One explanation for rigid (sticky) prices according to Keynes and others is flexible wages.
long-term labor contracts. inflation. government intervention.
Answer: long-term labor contracts.
Question 11: What is the shape of the short run aggregate supply for the AD-AS model used in class?
Upward sloping curve Horizontal line Downward sloping curve Vertical line
Answer: Upward sloping curve
Question 12: Which characteristics are associated with the Keynesian theory? Choose all that apply.
Long-run aggregate supply primarily affects economic growth (real GDP) Long-run view Inflexible
prices Short run view Flexible prices Aggregate demand primarily affects economic growth (real GDP)
Answer: Inflexible prices Short run view Aggregate demand primarily affects economic growth (real GDP)
Question 13: Which affect both the long-run and short-run aggregate supply curves? Choose all that
apply. Technology Net Exports Government Purchases Productivity Quantity of Labor Consumption
Investment Human Capital
Answer: Technology Productivity Quantity of Labor Human Capital
Question 14: Which only affects short run aggregate supply? Choose all that apply. Technology
Number of resources Inflationary expectations Input prices Saving
Answer: Inflationary expectations Input prices
Question 15: What happens when investment taxes decrease for the AD-AS model used in class?
Choose all that apply. Real GDP decreases. A recessionary gap occurs. The price level decreases. The
price level increases. Real GDP increases. An inflationary gap occurs.
Answer: The price level increases. Real GDP increases. An inflationary gap occurs.
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