1..Which of the following best describes the adjustment of prices to move the economy to full employment

A)If the short run level of output is below full employment, the price level will increase decreasing the level of output toward the full employment level

B) If the short run level of output is above full employment, the price level will increase decreasing the level of output toward the full employment level

C) If the short run level of output is above full employment, the price level will decrease, increasing the level of output toward the full employment level

D)If the short run level of output is below full employment, the price level will not change and the level of output will decrease toward the full employment level

2. Which of following is true concerning the short run aggregate supply curve in our model?

A)The short run aggregate supply curve indicates that there will be a inverse relationship between the price level and the level of output

B) The short run aggregate supply curve assumes prices stay fixed in the short run

C)The short run aggregate supply curve indicates that there will be a direct relationship between the price level and the level of output

D)The short run aggregate supply curve assumes will we always be at the full employment level of output

3. Which of the following best describes how the aggregate demand cure is found in our general equilibrium model?

A) The Aggregate Demand curve (AD ) can be found by finding the short run equilibrium level of output (Y) in both the goods and assets markets at each price level (P), then graphing the resulting combinations of output (Y) and price (P).

B) The Aggregate Demand curve (AD ) can be found by finding the short run equilibrium level of output (Y) in both the goods and labor markets at each price level (P), then graphing the resulting combinations of output (Y) and price (P).

C) The Aggregate Demand curve (AD ) can be found by finding the short run equilibrium level of output (Y) in both the labor and assets markets at each price level (P), then graphing the resulting combinations of output (Y) and price (P).

D)The Aggregate Demand curve (AD ) can be found by keeping the level of prices fixed and finding the finding the short run equilibrium level of output (Y) at each level of interest rates, then graphing the resulting combinations of output (Y) and real interest rate (r).

4.Which of the following will not cause a leftward shift in the aggregate demand curve?

A)A decrease in the effective tax on capital

b) An decrease in the expected future marginal product of capital

C) An decrease in desired consumption

D) An decrease in government purchases