Figure 1
P
LRAS
SRAS
SRAS,
0
AD
AD,
AD2
Use figure 1 to answer the multiple-choice questions 1-6.
For each question, suppose an economy begins in equilibrium at point d).
1. What is the short-run position after an increase in Investment?
a), b), c), d) or e).
2. What is the long run position after an increase in Investment? a), b), c), d) or e).
3. Which equilibrium position is known as 'stagflation"?
a), b), c), d) or e).
4. What is the short run position if price expectations increased? a), b), c), d) or e).
M20437
5. What equilibrium would represent a 'boom' in the business cycle?
a), b), c), d) or e).
6. What is the short-run position after a contractionary monetary policy?
a), b), c), d) or e).