1

Beginning at a long-run equilibrium, what is the short-run effect of an increase in consumer incomes?

a) An increase in the price level, no change in Real GDP

b) An increase in the price level, an increase in Real GDP

c) No change in the price level, an increase in Real GDP

d) No change in the price level, no change in Real GDP

2

Suppose a stock market crash drastically decreases household wealth. What would be the short-run effect?

a) An increase in Real GDP, a decrease in the GDP Deflator

b) An increase in Real GDP, an increase in the GDP Deflator

c) A decrease in Real GDP, an increase in the GDP Deflator

d) A decrease in Real GDP, a decrease in the GDP Deflator

3

Suppose consumer incomes increase. Which of the following would occur in the short-run?

a) Higher profits will lead to an increase in firm production

b) Higher resource costs will decrease profits and production

c) Government spending will decrease in order to smooth the business cycle

d) Short-run Aggregate Supply will increase

4

Suppose the current level of real GDP for an economy is above its potential level of RGDP. Starting with this situation, and in the absence of any government action, what should next happen to the price level and real GDP in the economy?

a) An increase in the price level, no change in Real GDP

b) An increase in the price level, a decrease in Real GDP

c) A decrease in the price level, a decrease in Real GDP

d) A decrease in the price level, no change in Real GDP

5

Suppose foreign incomes increase. Beginning in a long-run equilibrium, what would be the long-run effect on our goods and services market?

a) GDP Deflator increases, Real GDP increases

b) GDP Deflator decreases, Real GDP decreases

c) GDP Deflator increases, no change in Real GDP

d) GDP Deflator decreases, no change in Real GDP

6

What is the short-run effect of a temporary negative "oil shock" on an economy?

a) An increase in the deflator, a decrease in real GDP

b) No change in the deflator, no change in real GDP

c) An increase in the deflator, an increase in real GDP

d) A decrease in the deflator, a decrease in real GDP

e) An increase in the deflator, no change in real GDP

7

Suppose resource costs in an economy decrease. What short-run effect will this have on prices and real GDP?

a) An increase in the price level, an increase in real GDP

b) An increase in the price level, a decrease in real GDP

c) A decrease in the price level, a decrease in real GDP

d) A decrease in the price level, an increase in real GDP

8

Suppose the amount of technology in an economy increases. What long-run effect will this have on prices and real GDP?

a) A decrease in the price level, no change in Real GDP

b) A decrease in the price level, an increase in Real GDP

c) No change in the price level, an increase in Real GDP

d) No change in the price level, no change in Real GDP

9

Suppose the amount of productive resources in an economy decrease. What will be the resulting long-run change to the GDP deflator and RGDP in the goods and services market?

a) GDP Deflator will decrease, real GDP will increase

b) GDP Deflator will increase, real GDP will increase

c) GDP Deflator will decrease, real GDP will decrease

d) GDP Deflator will decrease, no change in real GDP

e) GDP Deflator will increase, real GDP will decrease

10

Which one of the following would shift the long-run aggregate supply curve?

a) An increase in consumer incomes

b) An increase in resource costs

c) An increase in the amount of buildings, machinery, and equipment

d) An increase in consumer sentiment about the future of the economy