Dynamic AD AS Quiz

What is the primary focus of the dynamic AD-AS model?

• Short-term economic fluctuations

• Long-term economic growth and inflation

• Exchange rate determination

• Fiscal policy effectiveness

In the dynamic AD-AS model, what happens to inflation when aggregate demand increases faster than aggregate supply?

• Inflation decreases

• Inflation remains stable

• Inflation increases

• Deflation occurs

Which of the following is a characteristic of deflation under the dynamic AD-AS model?

• Rising prices

• Decreasing prices

• Stable prices

• Increasing aggregate demand

How does the dynamic AD-AS model explain stable prices?

• Aggregate demand grows faster than aggregate supply

• Aggregate supply grows faster than aggregate demand

• Aggregate demand and aggregate supply grow at the same rate

• Aggregate demand decreases while aggregate supply remains constant

What is a key difference between the static and dynamic AD-AS models?

• The static model includes expectations about future inflation

• The dynamic model includes expectations about future inflation

• The static model focuses on long-term growth

• The dynamic model ignores short-term fluctuations

In the dynamic AD-AS model, what is the effect of a positive supply shock?

• Higher inflation

• Lower inflation

• Higher unemployment

• Lower aggregate demand

What role do expectations play in the dynamic AD-AS model?

• They are irrelevant

• They influence current inflation and output

• They only affect long-term growth

• They only affect fiscal policy

Which of the following best describes deflation in the dynamic AD-AS model?

• A sustained increase in the general price level

• A sustained decrease in the general price level

• A temporary decrease in prices

• A temporary increase in prices

How does the dynamic AD-AS model handle changes in technology?

• It ignores technological changes

• Technological changes shift the aggregate supply curve

• Technological changes shift the aggregate demand curve

• Technological changes have no impact on inflation

What is the impact of a decrease in aggregate demand in the dynamic AD-AS model?

• Higher inflation

• Lower inflation

• Higher aggregate supply

• Stable prices