Mod 19 Quiz

Stagflation is a combination of:

• increasing unemployment and increasing inflation.

• decreasing unemployment and decreasing inflation.

• increasing unemployment and decreasing inflation.

• decreasing unemployment and increasing inflation.

• increasing unemployment and deflation.

A decrease in aggregate demand will generate _______ in real GDP and _______ in the price level in the short run.

• an increase; no change

• a decrease; no change

• a decrease; a decrease

• no change; an increase

• a decrease; an increase

Suppose that the U.S. government doubles its spending on health care. Which of the following is most likely to occur?

• The short-run aggregate supply curve shifts right, output increases, and prices decrease.

• The short-run aggregate supply curve shifts left, output decreases, and prices increase.

• The aggregate demand curve shifts left, output decreases, and prices decrease.

• The aggregate demand curve shifts right, output increases, and prices increase.

• The aggregate demand curve shifts right, output increases, and prices decrease.

An inflationary gap:

• is generally regarded as desirable, especially by people living on a fixed income.

• means that the government should take measures to reduce unemployment.

• means that there are pressures for wages to fall.

• means that SRAS will soon shift rightward.

• means that the economy is operating beyond its potential output.

A recessionary gap can be closed by _______ wages that shift the _______ .

• lower; SRAS curve rightward

• lower; LRAS curve rightward

• lower; SRAS curve leftward

• higher; SRAS curve rightward

• higher; SRAS curve leftward