price level rises.

1.Based on your understanding of the AS-AD model, which of the following is an incorrect statement about the

short-run adjustment process for the macroeconomy?

Select one:

a. An increase in demand increases output.

b. Output in excess of the natural level leads to higher prices.

c. A reduction in unemployment leads to lower prices.

d. An increase in output increases employment.

e. An increase in output above the natural level leads to higher nominal wages.

2.Suppose policy makers underestimate the natural rate of unemployment. In such situations, policy makers will likely implement policies that result in:

Select one:

a. an unemployment rate that is “too high”.

b. a higher inflation rate than necessary.

c. a steadily decreasing inflation rate.

d. more unemployment than necessary.

e. overly restrictive monetary and fiscal policy.

3.In the wage-setting relation, the nominal wage increases when:

Select one:

a. the price level rises.

b. unemployment benefits decrease.

c. the unemployment rate rises.

d. the minimum wage decreases.

e. all of the above.

4.In the aggregate supply relation, a decrease in current output causes:

Select one:

a. an increase in the expected price level and an upward shift of the AS curve.

b. a change in the expected price level this year.

c. a decrease in the current price level.

d. a shift of the aggregate supply curve.

e. an increase in the markup over labour costs.

5.Which of the following is not in the labour force?

Select one:

a. the unemployed

b. those temporarily laid off who will be recalled soon

c. discouraged workers

d. those who worked full time, but in a family business

e. All of the above.


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