Question

1- According to the AS-AD model,

A) the AS curve is always equal to natural rate of output (potential GDP).

B) the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation.

C)the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment.

D) the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to natural rate of output (potential GDP).

E) changes in the amount of natural rate of output (potential GDP) is the only factor that shifts both the aggregate supply curve and the aggregate demand curve

2- Which of the following shifts the AS curve for the Turkish economy to the right? i.productivity increase of 3% in Turkish manufacturing industry ii.30% increase in the minimum wage iii. fall in world oil prices

A)i only

B)i and iii

C)i and ii

D)iii only

E)i, ii, and iii

3- The earthquake and the Fukushima nuclear disaster in Japan in 2011 may be illustrated by

A)aggregate demand curve shifts rightward.

B)real wage rate falls.

C)a rightward shift in LRAS and an upward shift in the AS curves

D)a leftward shift in LRAS and an upward shift in the AS curves

Answer 1

Answer 1.

D) the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to natural rate of output (potential GDP)

reason-

Equilibrium is where AS and AD curve meets but the potential GDP or natural rate of output may or may not be equal to the real GDP at the equilibrium.

Answer 2. i and iii only

reason- Rise in productivity shifts the AS curve to the right as more can be produced now. Increase in minimum wages leads to rise in cost of production and hence fall in aggregate supply. Fall in world oil prices leads to fall in cost of production in Turkey so supply rises and AS shifts to the right.

Answer 3. D)a leftward shift in LRAS and an upward shift in the AS curves

reason- Earthquake and nuclear disasters leads to fall in resources which could have been used for production. so potential production levels falls LRAS curve shifts to the left and SRAS also shifts to the left.