A) An increase in human capital.

B) Technological improvement.
C) A decrease in factor prices.
D) An increase in the capital stock.

52) Which of the following will cause an increase in both aggregate supply and long-run
aggregate supply?

A) An increase in factor prices.

B) A decrease in factor prices.
C) A decrease in the labour participation rate.
D) An increase in productivity.

53)

Refer to the graph above to answer this question. What could cause the change in aggregate
supply from AS1 to AS2?

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 A) An increase in resource prices.
B) An increase in business taxes.
C) An improvement in technology.
D) The real balances, interest-rate, and foreign-trade effects.
E) A decrease in the price level.

54) What could cause the level of Real GDP to rise but the price level to fall?

A) A rightward shift in the aggregate demand curve.

B) A leftward shift in the aggregate demand curve.
C) A rightward shift in the aggregate supply curve.
D) A leftward shift in the aggregate supply curve.

55) What happens if the aggregate demand curve shifts to the right?

A) The price level will rise.

B) Real GDP will increase.
C) Both A and B will occur.
D) Aggregate supply will also rise.

56) What is the multiplier?

A) It is the effect on income of a change in autonomous spending.

B) It is the effect on autonomous spending of a change in income.
C) It is the effect on the level of investment of a change in income.
D) It is the effect on aggregate demand of a change in income.

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57) Under what circumstances will the multiplier effect have a big impact on Real GDP?

A) When the AS curve is vertical.

B) When the AD curve is vertical.
C) When the AS is horizontal.
D) When the economy is booming.

58) If the economy is at full employment and the LAS curve shifts to the right because of,
say, an increase in labour force participation rate, then which of the following will result?

A) The AS curve will also shift to the right and full employment will be maintained.
B) The AS curve will also shift to the right, but a recessionary gap will result.
C) The AS curve will shift to the left and full employment will be maintained.
D) The AS curve will not be affected.
E) The AS curve may or may not shift depending on what happens to the wage rate.

59) If the economy is at full employment and both the AS curve and the LAS curve shift
right, why might the economy experience a recessionary gap?

A) Because prices are inflexible downwards.

B) Because the LAS curve will always shift more than the AS curve.
C) Because a new equilibrium price level may be established that is above the price level
needed to maintain full employment
D) Because a new equilibrium price level may be established that is below the price level
needed to maintain full employment
E) Because there is no reason to assume that the aggregate demand curve will shift.

60) What would result if the AS curve shifts to the left?

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 A) Equilibrium GDP will fall and prices will rise.
B) Equilibrium GDP will fall and prices will also fall.
C) Equilibrium GDP will rise and prices will fall.
D) Equilibrium GDP will rise and prices will also rise.

61) What is the result of a decrease in the AS curve?

A) It will decrease the price level and decrease Real GDP.

B) It will decrease the price level and raise Real GDP.
C) It will raise the price level and decrease Real GDP.
D) It will raise the price level and raise Real GDP.
E) It will decrease the price level and may or may not change Real GDP depending on
the shape of the SAS curve.

62) What is the result of a decrease in the LAS curve?

A) It will raise the price level and raise Real GDP.

B) It will raise the price level and decrease Real GDP.
C) It will lower the price level and raise Real GDP.
D) It will lower the price level and decrease Real GDP.
E) It will leave the price level unchanged and decrease Real GDP.

63) How does the economy eventually adjust to a recessionary gap?

A) The nominal wage and price levels will both increase.

B) The nominal wage and price level will both decrease.
C) The nominal wage level will decrease but the price level will increase.
D) The nominal wage level will increase but the price level will decrease.

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64) How does the economy eventually adjust to an inflationary gap?

A) The nominal wage and price levels will both increase.

B) The nominal wage and price level will both decrease.
C) The nominal wage level will decrease but the price level will increase.
D) The nominal wage level will increase but the price level will decrease.

65) How did the neoclassical school view equilibrium?

A) As occurring at capacity output.

B) Where AS = LAS.
C) In a way that implied full employment.
D) As being a natural result of flexible prices and wages.
E) As occurring at capacity output, where AS = LAS, in a way that implied full
employment and as being a natural result of flexible prices and wages.

66) According to Keynesians, which of the following statements is correct?

A) The AD curve is horizontal but the AS is upward sloping.

B) The AD curve is vertical but the AS is upward sloping.
C) The AS is horizontal but the AD is downward sloping.
D) The AS is vertical but the AD is upward sloping.

67) According to neoclassical economists, which of the following statements is correct?

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