Title: QUIZ: Aggregate Demand and Aggregate Supply: Negative Demand Shock
Course: Kelly's Copy-Export Course > Section: Aggregate Demand and Aggregate Supply: Negative Demand Shock

Q: When the aggregate demand, short-run aggregate supply, and long aggregate supply curves intersect at a single point, this indicates an economy experiencing
- short-run equilibrium.
- inflationary gap.
- recessionary gap.
- full employment.
A: full employment.

Q: Which of the following is an example of a negative demand shock?
- Businesses decrease their spending on capital goods.
- Businesses increase their spending on capital goods.
- Consumers feel confident about the economy.
- The government increases its purchase of military tanks.
A: Businesses decrease their spending on capital goods.

Q: Which of the following best describes the short-run adjustments to a negative demand shock?
- AD shifts right, causes a recession, increased unemployment rate, decreased output
- AD shifts left, causes a recession, increased unemployment rate, decreased output
- AS shifts right, causes inflation, decreased unemployment rate, increased output
- AS shifts right, long-run equilibrium, full employment, increased output
A: AD shifts left, causes a recession, increased unemployment rate, decreased output

Q: As the unemployment rate increases, workers are willing to accept lower nominal wages in the long-run. As a result, the prices of other inputs may decrease.
- True
- False
A: True

Q: When there is a negative demand shock, the flexibility of the prices of inputs in the long-run cause the following effects on the economy:
- Decrease AD, the economy returns to potential output at a lower price level
- Increase SRAS, the economy moves beyond potential output at a higher price level
- Increase SRAS, the economy returns to potential output at a lower price level
- Decrease SRAS, the economy returns to potential output at a lower price level
A: Increase SRAS, the economy returns to potential output at a lower price level