Question

If the price level decreases, then aggregate demand increase along the AD curve but the curve doesn’t shift.

a. True

b. False

The Long-run Aggregate Supply Curve (LRAS) can shift to the right because of:

a. Discovery of more natural resources

b. Development of more efficient technology

c. Inviting more labor force through Immigration

d. All of the above

Which of the following may happen due to a crash in the stock market:

a. AD curve may shift to the left causing output, employment and prices to go down.

b. AD curve may shift to the right causing output and prices to go up

c. AD curve may remain unaffected but SRAS may shift to the left

d. None of the above

Which of the following may happen to the US economy if there is an economic boom to its trading partner, say Canada?

a. The US price level will increase

b. The US employment will decrease

c. Both a and b

Answer 1

a) True, a change in the price level will only cause a movement along the AD curve and not shift the Ad curve.

b) "D"

All the option given here are true and that will shift the LRAS to the right.

c) "A"

Crash will decrease the wealth in the market and that will shift the Ad curve to the left decreasing the price, output and employment.

d) "C"

this will shift the Ad of the US to the right thereby increasing the price and employment.