If the classical dichotomy and monetary neutrality hold in the long run, then the long-run aggregate supply curve should be vertical.
Aggregate Demand and Aggregate Supply

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Hard
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15 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
True
False
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If a country’s central bank increases the money supply, the aggregate demand curve shifts to the left.
True
False
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In the long run, an increase in government spending tends to increase output and prices.
True
False
4.
MULTIPLE CHOICE QUESTION
1 min • 1 pt
According to the interest rate effect, aggregate demand slopes downward (negatively) because
lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
lower prices increase the value of money holdings and consumer spending increases
lower prices decrease the value of money holdings and consumer spending decreases.
lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
5.
MULTIPLE CHOICE QUESTION
1 min • 1 pt
Which of the following would not cause a shift in the long-run aggregate supply curve?
An increase in the available capital
An increase in the available labourd
An increase in the available technologye
An increase in price expectations
All of these answers shift the long-run aggregate supply curve
6.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Which of the following is not a reason why the aggregate demand curve slopes downward?
The exchange-rate effect
The wealth effect.
The classical dichotomy/monetary neutrality effects.
The interest-rate effect
7.
MULTIPLE CHOICE QUESTION
1 min • 1 pt
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to
shift the short-run aggregate supply curve to the left.
shift the aggregate demand curve to the right.
shift the short-run aggregate supply curve to the right.
shift the aggregate demand curve to the left.
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