1.According to Say's law, a given value of supply must create

a. an abundance of wealth for the economy's agents

b. further increases in the supply of the inputs to production

c. a decrease in the demand for the product

d. an equivalent value of demand somewhere else in the economy

2.Potential GDP rises when aggregate demand increasesbecause the resulting higher price level makes it beneficial for suppliers to expand production.

a. True

b. False

3.The Short-run Aggregate supply (AS) slopes up, because _______________________________________, firms have an incentive to produce more to earn higher profits.

a. as the price level for outputs falls, with the price of inputs remaining fixed

b. as the price level for outputs rises, with the price of inputs remaining fixed

c. as the price level for outputs rises, with the price of inputs rising too

d. as the price level for outputs falls, with the price of inputs increasing

4.An adverse supply shock is caused by

a. a sudden increase in the inflow of immigrants

b. a sudden increase in the global price of oil

c. A great season for growing agricultural products

d. a terrorist attack which destroys a domestic industry

5.If businesses are confident about anincrease in demand for their products, they will

a. expand production and reduce investment spending

b. expand production and investment spending

c. reduce production and investment spending

d. reduceproduction and expand investment spending

6.Inflation pressures risein the short run whenever __________.

a. the AD curve shifts to the right

b. the AD curve shifts to the left

c. the AScurve shifts to the right

d. the AScurve shifts to the left

6.Economic growthcan be illustrated in the AD/AS framework through __________.

a. a shift of the short-run aggregate supply curveto the right

b. a shift of aggregate demand curve to the left

c. a shift of long-run aggregate supply curve to the right

d. a shift of short-run aggregate supply curveto the left

7.The aggregate supply curve shows how suppliers expand production when

a. labor costs increase

b. the price level rises

c. GDP rises

d. none of the above