Suppose the economy is in long-run equilibrium and wealth increases. In the long-run, the inflation rate will _____ relative to its initial level.

Question 11 options:

increase

decrease

not change

Question 12(1 point)

Suppose an event occurs that results in a short-run effect of increasing the unemployment rate and increasing the inflation rate in the economy.This will occur as a result of which of the following?

Question 12 options:

Positive demand shock

Negative demand shock

Positive temporary supply shock

Negative temporary supply shock

Question 13(1 point)

Suppose an economy is in long-run equilibrium.Which of the following events will cause a recessionary gap? i. increase in taxes ii. increase in interest rates iii. increase in the expected price level iv. decrease in wealth

Question 13 options:

i only

iii only

i, ii and iv only

all of the above

none of the above

Question 14(1 point)

When the economy is in a recession, optimal fiscal policy to stabilize the business cycle would be to _____.

Question 14 options:

Increase aggregate demand

Decrease aggregate demand

Increase short-run aggregate supply

Decrease short-run aggregate supply

Question 15(1 point)

When the economy is in a recession and the government intervenes to stabilize the business cycle, which one of the following statements is true?

Question 15 options:

In the long-run, the inflation rate will be higher than it would otherwise be.

In the long-run, the inflation rate will be lower than it would otherwise be.

In the long-run, the unemployment rate will be higher than it would otherwise be.

In the long-run, the unemployment rate will be lower than it would otherwise be.