SOLVED

21) Workers expect inflation to rise from 3% to 5% next year. As a result, this should A) shift the short-run aggregate supply curve to the left. B) shift the short-run aggregate supply curve to the right. C) move the economy up along a stationary short-run aggregate supply curve. D) move the economy down along a stationary short-run aggregate supply curve. 22) Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result, A) workers will be willing to take lower wages next year, but not lower than a 2.5 percent decrease. B) the purchasing power of wages will rise if wages increase by 2.5%. C) the short-run aggregate supply curve will shift to the left as wages increase. D) aggregate demand will increase by 2.5% 23) Which of the following would cause the short-run aggregate supply curve to shift to the right? A) an increase in the price level B) a decrease in inflation expectations C) a technological advance D) an increase in interest rates 24) Refer to Figure 15-2. Ceteris paribus, an increase in the labor force would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 25) Refer to Figure 15-2. Ceteris paribus, a decrease in the capital stock would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 26) Refer to Figure 15-2. Ceteris paribus, an increase in productivity would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 27) Refer to Figure 15-2. Ceteris paribus, an increase in the price level would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 28) Refer to Figure 15-2. Ceteris paribus, an increase in the expected future price level would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 29) Refer to Figure 15-2. Ceteris paribus, an increase in workers and firms adjusting to having previously overestimated the price level would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 30) Refer to Figure 15-2. Ceteris paribus, an increase in the expected price of an important natural resource would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A. 31) The long-run aggregate supply curve is vertical. 32) When potential GDP increases, long-run aggregate supply also increases. 33) A supply shock causes the long-run aggregate supply curve to shift left, decreasing the price level. 34) Explain why the long-run aggregate supply curve is vertical. 35) What variables cause the short-run aggregate supply curve to shift? For each variable, identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left. 36) Explain how “menu costs” affect the slope of the short-run aggregate supply curve.