1. Which of the following is considered a negative supply shock?
   1. increasing investment in the economy causes the capital stockto rise
   2. an unexpected increase in the price of natural gas
   3. a decline in wages
   4. an improvement in technology
2. Stagflation occurs when inflation ________ and GDP ________.
   1. rises; rises
   2. rises; falls
   3. falls; rises
   4. falls; falls

3. Which of the following can be said about economic growth?
   1. Economic growth is the result of increases in long-runaggregate supply.
   2. Economic growth is the result of increases in aggregate demand.
      1. I only
      2. II only
      3. I and II
      4. neither I or II

1. In the above figure, as the economy adjusts toward equilibrium,the:
   1. AD curve will shift rightward.
   2. SAS curve will shift rightward.
   3. AD curve will shift leftward.
   4. SAS curve will shift leftward.

2. In the above figure, when the economy is in a long-runequilibrium, the price level will be _________ and real GDP will be_________.
   1. 90; $16.0 trillion.
   2. 100; $16.5 trillion.
   3. 110; $16.5 trillion.
   4. 120; $16.0 trillion.