1.What events/situations can cause:

a.The LAS curve to shift?

b.The SAS curve to shift?

2.What will happen to the:

a.LAS curve if Money wage rates fall?

b.LAS curve if the quantity of human capital increases?

c.SAS curve if Money wage rates fall?

d.SAS curve if the quantity of human capital increases?

3.What will happen to Aggregate Demand if:

a.The exchange rate increases?

b.There is an increase in imports?

c.Government expenditures increase?

d.There is a decrease in government transfer payments?

e.Taxes increase?

4.Define the following (specifically using the relationship between real GDP and Potential GDP):

a.Recessionary gap (below full-employment equilibrium)

b.Inflationary gap (above full-employment equilibrium)

c.Full-employment (long-run macroeconomic equilibrium)

5.Using the above graph,

a.At Point A, what type of output gap exists?

b.At Point C, what type of output gap exists?

c.What does Point B represent?

6.Using the above graph, what is the short-run equilibrium level of real GDP and price level?

7.What will happen to real GDP and price level if Aggregate Demand increases (shifts to the right)?

8.What will happen to real GDP and price level if the Short-run Aggregate Supply decreases?

Price level Aggregate demand Short-run aggregate supply Long-run aggregate supply

120 500 300 500

130 400 400 500

140 300 500 500

150 200 600 500

9.Using the above table,

a.In short-run macroeconomic equilibrium, what is the level of real GDP and price level?

b.Is there a recessionary gap, inflationary gap, or full employment?Why?

c.If there is an output gap, what is its magnitude?

Price level Aggregate demand Short-run aggregate supply Long-run aggregate supply

140 1200 800 800

150 1100 900 800

160 1000 1000 800

170 900 1100 800

10.Using the above table,

a.In short-run macroeconomic equilibrium, what is the level of real GDP and price level?

b.Is there a recessionary gap, inflationary gap, or full employment?Why?

c.If there is an output gap, what is its magnitude?