The level of long-run aggregate supply is affected by all of the following except

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1. All of the following factors are fundamental to an economy’s potential growth rate except for: *

a. Labor.

b. Capital.

c. Money supply.

d. Ideas.

2. How does inflation affect the long-run real growth? *

a. Inflation causes long-run real growth to increase.

b. Inflation causes long-run real growth to decrease.

c. Inflation does not have an effect on long-run real growth.

d. There are many other factors to consider before determining how inflation will affect long-run real growth.

3. An economy’s potential growth rate is also known as what? *

a. Solow growth rate.

b. Keynesian growth rate.

c. Inflation rate.

d. Real interest rate.

4. Which of the following is an example of a negative real shock to an economy? *

a. Consumer confidence in the future of the economy falls.

b. A drought stifles crop growth for the season.

c. The government spends more money on a war.

d. The government reduces taxes.

5. A negative real shock to the economy shifts the LRAS curve to the left, causing a(n) ____________ in growth and a(n) ____________ in inflation. *

a. Increase/increase

b. Decrease/decrease

c. Decrease/increase

d. Increase/decrease

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