Tackle the Test: Free-Response Questions

1. Question

   
   

   1. Draw a correctly labeled graph illustrating a long-run aggregate supply curve.

      
      
   
   

   2. On your graph from part a, label potential output.

      
      
   
   

   3. On your graph from part a, illustrate an increase in long-run aggregate supply.

      
      
   
   

   4. What could have caused the change you illustrated in part c? List three possible causes.

      
      
   
   

   Rubric for FRQ 1 (8 points)

   

   1 point: Vertical axis labeled “Aggregate price level” (or “Price level”)

   1 point: Horizontal axis labeled “Real GDP”

   1 point: Vertical curve labeled “LRAS” (or “LRAS₁”)

   1 point: Potential output labeled Y_P (or Y_P1) on the horizontal axis at the intercept of the long-run aggregate supply curve

   1 point: Long-run aggregate supply curve shifted to the right

   1 point: An increase in the quantity of resources (land, labor, capital, or entrepreneurship)

   1 point: An increase in the quality of resources

   1 point: Technological progress

2. Question

   
   

   1. Draw a correctly labeled short-run aggregate supply curve.

      
      
   
   

   2. On your graph from part a, illustrate a decrease in short-run aggregate supply.

      
      
   
   

   3. List three types of changes, including the factor that changes and the direction of the change, that could lead to a decrease in short-run aggregate supply. (6 points)

      
      
   
   

   Rubric for FRQ 2 (4 points)

   

   1 point: The vertical axis is labeled “Aggregate price level” or “Price level” and the horizontal axis is labeled “Real GDP.”

   1 point: The short-run aggregate supply curve is upward-sloping and labeled.

   1 point: A new short-run aggregate supply curve is upward-sloping, labeled, and shown to the left of the original SRAS curve.

   1 point each for up to three of the following four answers:

   An increase in commodity prices

   An increase in nominal wages

   A decrease in productivity

   An increase in the expected inflation rate