Question 1(2 points)

It is very important to distinguish between the flexibility of input prices in short run versus the long-run when we are discussing

Question 1 options:

	The aggregate demand curve
	Changes in the price level
	The aggregate supply curve
	Nominal GDP

Question 2(2 points)

What determines the slope of the short-run aggregate supply curve is

Question 2 options:

	How fast input prices respond to changes in output prices
	How much more the economy can produce without any change in the price level
	How fast the output level changes after a technological advance
	None of the above

Question 3(2 points)

Refer to the above figure.Which of the following causes the economy to move from AS₀to AS₂

Question 3 options:

	An increases difficulty in foreign workers who specialize in research and development immigrating to the United States
	An increase in technological progress
	An increase in machinery and equipment
	An increase in the inflation rate

Question 4(2 points)

Refer to the above figure.During the 1990s, many firms in the United States were investing in new capital.If the economy's original short-run aggregate supply curve was originally AS₀, this would have caused

Question 4 options:

	An upward movement along the SRAS0line
	A downward movement along the SRAS0line
	A shift to the AS1
	A shift to the AS2

Question 5(2 points)

Draw an AD-SRAS, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation has increased in the economy as well as the overall output. What type of shock must have hit the economy?

Question 5 options:

	A positive aggregate supply shock
	A positive aggregate demand shock
	A negative aggregate demand shock
	A negative aggregate supply shock

Question 6(2 points)

Draw an AD-SRAS, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation has increased in the economy as well as the overall output. What could have caused the shock?

Question 6 options:

	An increase in government spending
	A decrease in government spending
	An increase in the capital stock
	A decrease in the capital stock

Question 7(2 points)

Draw an AD-SRAS diagram, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation has increased in the economy but the overall output has declined. What shock must have hit the economy

Question 7 options:

	A negative aggregate supply shock
	A positive aggregate demand shock
	A negative aggregate demand shock
	A positive aggregate supply shock

Question 8(2 points)

Draw an AD-SRAS diagram, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation has increased in the economy but the overall output has declined. What could have caused the above shock?

Question 8 options:

	A decrease in labor
	A increase in labor
	An increase in imports
	A decrease in imports

Question 9(2 points)

Draw an AD-SRAS where the economy is initially at equilibrium. When drawing the diagram, note that input prices are completely flexible. For this particular economy, if exports in the economy increased and everything else were to remain unchanged, what would happen to output after the rise in exports?

Question 9 options:

	Output would remain the same
	Output would increase
	Output would decrease
	Not enough information to answer the question