ECON1220_CD Introductory Macroeconomics Tutorial 7, Week 11

1) Refer to Figure.

Which of the points in the above graph are possible long-run equilibria?
A) A and B
B) A and C
C) A and D
D) B and D

2) Refer to Figure.

Which of the points in the above graph are possible short-run equilibria but not long-
run equilibria? Assume that Y1 represents potential GDP.
A) A and B
B) A and C
C) C and D
D) B and D
ECON1220_CD Introductory Macroeconomics Tutorial 7, Week 11

3) Refer to Figure.

Suppose the economy is at point A. If investment spending increases in the

economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D

4) Refer to Figure.

Suppose the economy is at point C. If government spending decreases in the

economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
ECON1220_CD Introductory Macroeconomics Tutorial 7, Week 11

5) Refer to Figure.

Suppose the economy is at point A. If the economy experiences a supply shock,

where will the eventual short-run equilibrium be?
A) A
B) B
C) C
D) D

6) Refer to Figure.

Which of the points in the above graph are possible short-run equilibria?
A) A and B
B) A and C
C) A and D
D) A, B, C, and D
ECON1220_CD Introductory Macroeconomics Tutorial 7, Week 11

7) Refer to Figure .

Suppose the economy is at point C. If investment spending decreases in the

economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D

8) Refer to Figure.

Suppose the economy is at point A. If government spending increases in the

economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
ECON1220_CD Introductory Macroeconomics Tutorial 7, Week 11

9) Starting from long-run equilibrium, use the basic aggregate demand and aggregate
supply diagram to show what happens in both the long run and the short run when
there is a decline in interest rate resulted from a higher money supply.

10) Using the aggregate supply and demand model, illustrate what happens in the
long run when the economy suffers a supply shock. Begin your analysis by
assuming the economy has suffered the supply shock in the short run, but has not
yet adjusted to it in the long run.