Answers to questions can be found in the answers section.

1. Aggregate supply represents the output of
   1. all foreign-owned firms on US soil.
   2. all domestic-owned firms on US soil.
   3. all domestic-owned and foreign-owned firms on foreign soil.
   4. all domestic-owned and foreign-owned firms on US soil.

2. The aggregate supply curve says that an increase in the nation’s price level causes aggregate supply to
   1. decrease.
   2. shift leftward.
   3. shift rightward.
   4. increase.

3. The aggregate supply curve will shift rightward whenever
   1. costs rise relative to prices.
   2. costs fall relative to prices.
   3. costs rise relative to productivity.
   4. costs fall relative to productivity.

4. Which of the following events might cause the aggregate supply curve to shift leftward?
   1. energy prices decline
   2. government introduces a higher tariff on imported steel
   3. minimum wage declines
   4. R&D spending leads to large gains in manufacturing productivity

5. Which of the following would not be a supply-side policy tool?
   1. reduction in marginal income tax rates
   2. subsidy to firms who buy new capital
   3. decrease in the money supply
   4. deregulation of broadcast firms

6. Supply-side policy would be useful for which of these situations?
   1. after a decrease in the price of oil
   2. union bargaining strength declines
   3. forecasts predict an economic slowdown and lower inflation
   4. forecasters predict an economic slowdown and higher inflation

7. Supply-side policy would be useful for which of these situations?
   1. after a rise in the price of oil
   2. after a large increase in wage costs
   3. after a period of rising interest rates
   4. All of the above