6. Which of the following is the traditional assumption that "self-correcting" market forces will quickly restore a recessed economy to full-employment depend on? a. A reliable spending multiplier b. A fast adjustment to wages only c. A fast adjustment to other non-wage inputs (i.e. commodities) only d. A fast adjustment to both wages and other input (i.e. commodity) prices e. A fast response by policy-makers Figure 1 AS PL AS PLI AS, PL AS2 PL ASI PL ASI AD AD2 AD AD ADI rGDP rGDP rGDP IGDP IGDP (A) (B) (C) (D) (E) 7. Which of the graphs in Figure 1 above best illustrates the most immediate impact decreased federal funding to explore space would have on the economy's price level and output? a. Graph A b. Graph B c. Graph C d. Graph D e. Graph E 8. If a shock to the economy left actual output less than the economy's potential (i.e. sustainable) level of production, what would eventually happen to input prices, short-run aggregate supply, and long-run aggregate supply absent any further shocks? Input Prices SRAS LRAS a. Decrease Gradually shifts rightward Remains unchanged b. Increase Gradually shifts rightward Remains unchanged c. No change No change No change d. Increase Gradually shift leftward Remains unchanged e. Decrease Gradually shifts leftward Remains unchanged 9. Which of the following is always true of a recessionary gap? quote draw a a. Inflation has caused consumption to fall b. Actual output exceeds potential output , c. Deflation has caused consumption to fall d. Potential output exceeds actual output / e. The levels of consumer, investment and government spending rises