Answer these Multiple Choice Questions

Which one of the following is most likely to result in a rightward shift of the short-run aggregate supply curve? A A decrease in wage rates A decrease in government spending 3 C An increase in taxation D An increase in investment expenditure The four diag'ams below show aggregate demand (AD) and long-run and short-run aggregate supply (LRASISRAS) curves for an economy where OF'1 is the inilial equilibrium price and 0'1"1 the initial equilibrium level of real national output. Which diagram, A, B, C or D, shows the change reculling from an increase in innovation and productivity improvements? A Prim LRAS LRA level 1 52 0 Y1 '1'; Real national Y1 Y2 output output 0 Y1 Real national Real national output output 3 A rise in the level of domestic investment will most likely result from a rise in A the current account deficit. B interest rates. C company profits. D the exchange rate. 4- The diagram below shows an aggregate demand (AD) curve for an economy. Price level X AD Real national output The movement down the aggregate demand curve from X to Y shows that A as real national output rises, firms can lower their costs due to mass production. B as real national output falls, the price of imported goods rises. C as the price level rises, the nominal value of consumption and investment falls. D as the price level falls, consumers and firms purchase more goods. 5 An economy is currently operating with a negative output gap. In the short run, if the rate of growth of aggregate demand is positive but less than the rate of growth of productive capacity, then the economy is most likely to experience A a decrease in output. B an increase in unemployment. C a decrease in its trend rate of growth. D a decrease in exports.6 An increase in interest rates when the exchange rate is rising is most likely to lead to an increase in A economic growth. B aggregate supply. C the current account surplus. D unemployment levels. 7 The diagram below shows the aggregate demand (AD) curve and two long-run aggregate supply (LRAS) curves for an economy. Price LRAS2 LRAS1 level P2 AD Y2 Y1 Real national output The decline in equilibrium real national output from Y, to Y2 implies that the economy A is operating within its production possibility frontier. has a falling level of unemployment. C has a negative rate of economic growth. D is experiencing a low rate of productivity growth. 8 Which one of the following is most likely to lead to a fall in aggregate investment? A A reduction in the level of unemployment B An increase in spare capacity in the economy C A reduction in the average level of interest rates D An increase in aggregate demandq The diagram below shows the aggregate demand (AD). the short-run aggregate supply (ERAS) and the long-run aggregate supply (LRAS) curves for an economy. Price . LRAS level 0 Real national output The economy is currently operating at point X. At this point. the economy must be experiencing ' A ination caused by excess demand. B ination caused by increasing costs. c ' unemployment of labour. D a low rate of economic growth. [0 'Economists predict that the negative output gap in the economy is likely to grow over the next couple of years.\" In the short run. which one of the following policies is most likely to help to prevent this negative output gap increasing? A The Central Bank raising interest rates B The government taking action to increase the exchange rate of the currency C An increase in government expenditure accompanied by a growing budget decit D The implementation of supply-side policies that are designed to raise labour productivity