1) Suppose the economy is initially in long-run equilibrium. Then suppose investors become more optimistic and investor sentiments increase. This will cause a(n)

  1. increase in AS
  2. decrease in AS
  3. increase in AD
  4. decrease in AD
  5. not affect AS or AD

2) Continuing with the previous question, what happens to income and unemployment in the short run?

  1. income rises and unemployment falls
  2. both income and unemployment rise
  3. both income and unemployment fall
  4. income falls and unemployment rises
  5. income and unemployment do not change

3) Continuing with the previous questions, what happens to prices in the short run?

  1. prices rise
  2. prices fall
  3. prices stay the same

4) Continuing with the previous question, compared to the initial starting point of the economy, what happens in the long run?

  1. prices rise, output rises
  2. prices rise, output falls
  3. prices fall, output rises
  4. prices fall, output falls
  5. output does not change

5) Suppose the economy is initially in long-run equilibrium. Then suppose bad weather hits the midwest. This will cause a(n)

  1. increase in AS
  2. decrease in AS
  3. increase in AD
  4. decrease in AD
  5. not affect AS or AD

6) Continuing with the previous question, what happens to income and unemployment in the short run?

  1. income rises and unemployment falls
  2. both income and unemployment rise
  3. both income and unemployment fall
  4. income falls and unemployment rises
  5. income and unemployment do not change

7) Continuing with the previous questions, what happens to prices in the short run?

  1. prices rise
  2. prices fall
  3. prices stay the same

8) Suppose the economy is initially in long-run equilibrium. Then suppose the government increases spending on highway improvement without increasing taxes. This will cause a(n)

  1. increase in AS
  2. decrease in AS
  3. increase in AD
  4. decrease in AD
  5. not affect AS or AD

9) Continuing with the previous question, what happens to income and unemployment in the short run?

  1. income rises and unemployment falls
  2. both income and unemployment rise
  3. both income and unemployment fall
  4. income falls and unemployment rises
  5. income and unemployment do not change

10) Continuing with the previous questions, what happens to prices in the short run?

  1. prices rise
  2. prices fall
  3. prices stay the same

11) Continuing with the previous questions, compared to the initial starting point of the economy, what happens in the long run?

  1. prices rise, output rises
  2. prices rise, output falls
  3. prices fall, output rises
  4. prices fall, output falls
  5. output does not change

12) Suppose the economy is initially in long-run equilibrium. Then suppose consumer confidence drops. This will cause a(n)

  1. increase in AS
  2. decrease in AS
  3. increase in AD
  4. decrease in AD
  5. not affect AS or AD

13) Continuing with the previous question, what happens to income and unemployment in the short run?

  1. income rises and unemployment falls
  2. both income and unemployment rise
  3. both income and unemployment fall
  4. income falls and unemployment rises
  5. income and unemployment do not change

14) Continuing with the previous questions, what happens to prices in the short run?

  1. prices rise
  2. prices fall
  3. prices stay the same