Question

 Question 9

 When the expected price level increases, it causes short-run aggregate supply to shift to the

  left, and an increase in the actual price level does not shift short-run aggregate supply.

  right, and an increase in the actual price level does not shift short-run aggregate supply.

  left, and an increase in the actual price level shifts short-run aggregate supply to the left.

  right, and an increase in the actual price level shifts short-run aggregate supply to the right.

 Question 10

 Suppose the economy is initially at long-run equilibrium and then aggregate demand decreases. In

 the long run, the price level

  is lower and output is the same as the original long-run equilibrium.

  is the same and output is lower than in the original long-run equilibrium.

  and output are lower than in the original long-run equilibrium.

  and output are higher than in the original long-run equilibrium.

 Question 11

 Suppose that money demand decreases for some reason other than a change in the price level.

 According to liquidity preference theory, this decrease causes

  the interest rate to fall, so aggregate demand shifts left.

  the interest rate to rise, so aggregate demand shifts right.

  the interest rate to fall, so aggregate demand shifts right.

  the interest rate to rise, so aggregate demand shifts left.

Answer 1

Question 9 - option D Is the correct answer

Reason - when the expected price level increases then the aggregate supply in short run shifts rightward causing rightward shift to actual price level also

Question 10 - option C Is the corret answer

Reason - due to decrease in aggregate demand the aggregate demand curve will shift left hence this will decrease the price level and also the output level in long run.

Question - option D is the correct answer

Reason - when money supply decrease then according to liquidity price theory there will be fall in the interest rates and aggregate demand will shift left