Chapter 31 — Quiz

Q1. AD slopes down because of: a) Diminishing returns b) Wealth, interest rate, and exchange rate effects c) Sticky wages d) Government spending Q2. LRAS is vertical because: a) Prices are sticky b) In the long run, output depends on resources and technology, not the price level c) AD is vertical d) There is no long run Q3. Stagflation occurs when: a) AD shifts right b) SRAS shifts left (prices up, GDP down) c) LRAS shifts right d) AD and SRAS both shift right Q4. A recessionary gap means: a) GDP > potential b) GDP < potential c) GDP = potential d) Inflation is high Q5. The Keynesian view says: a) Self-correction is fast b) Government intervention can speed recovery from recessions c) The government should never intervene d) Only monetary policy matters Q6. The classical view says: a) Self-correction works; intervention is unnecessary b) Only fiscal policy matters c) Recessions never happen d) Wages adjust instantly

SA1. Name the three reasons AD slopes downward. SA2. Why does SRAS slope upward? SA3. Summarize the Keynesian vs. classical debate in two sentences.

TF1. LRAS depends on the price level. (T/F) TF2. A simultaneous AD-left and SRAS-left shock always causes deflation. (T/F) TF3. The Keynesian-classical debate is about the speed of self-correction. (T/F)

Selected answers in appendices/answers-to-selected.md.