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AP Macroeconomics Practice Quiz: Long-Run Self-Adjustment

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 9 questions to check your progress.

Question 1 of 9

Following a negative shock to aggregate demand, which of the following describes the long-run self-adjustment process in the absence of government intervention?

All Questions (9)

Following a negative shock to aggregate demand, which of the following describes the long-run self-adjustment process in the absence of government intervention?

A) Nominal wages fall, causing the short-run aggregate supply curve to shift to the right.

B) The price level rises, causing the aggregate demand curve to shift back to its original position.

C) The long-run aggregate supply curve shifts to the left to meet the new, lower level of output.

D) Nominal wages rise, causing the short-run aggregate supply curve to shift to the left.

Correct Answer: A

A negative aggregate demand shock leads to higher unemployment. In the long run, this puts downward pressure on nominal wages. Lower wages are a decrease in input costs for firms, which shifts the short-run aggregate supply curve to the right, restoring the economy to its full-employment level of output at a lower price level. This is driven by flexible wages and prices.

If an economy is operating with an inflationary gap, what will happen in the long run as the economy self-adjusts?

A) The short-run aggregate supply curve will shift to the left as nominal wages rise.

B) The aggregate demand curve will shift to the left as consumers reduce spending.

C) The long-run aggregate supply curve will shift to the right to accommodate the higher output.

D) The short-run aggregate supply curve will shift to the right as prices fall.

Correct Answer: A

An inflationary gap means unemployment is below its natural rate. This leads to competition for workers, causing nominal wages to rise. Higher wages increase production costs, which shifts the short-run aggregate supply curve to the left, returning the economy to its full-employment output level but at a higher price level.

According to the principle of long-run self-adjustment, after a shock to aggregate demand or short-run aggregate supply, the economy will eventually return to a point where...

A) the price level is the same as it was before the shock.

B) unemployment is at its natural rate.

C) nominal wages are unchanged from their original level.

D) the aggregate demand curve has shifted back to its original position.

Correct Answer: B

The core of the long-run self-adjustment mechanism is that flexible wages and prices will adjust to restore full employment. When the economy is at full employment, unemployment has reverted to its natural rate.

Which of the following represents a change in the full-employment level of output and signifies economic growth?

A) A rightward shift of the aggregate demand curve.

B) A rightward shift of the short-run aggregate supply curve.

C) A rightward shift of the long-run aggregate supply curve.

D) A movement along the long-run aggregate supply curve.

Correct Answer: C

The provided content explicitly states that 'Shifts in the long-run aggregate supply curve indicate changes in the full-employment level of output and economic growth.' The other options describe short-run shocks or the adjustment process back to the existing full-employment level.

The key mechanism that drives the economy's long-run self-adjustment process after a shock is the flexibility of...

A) government spending.

B) consumer expectations.

C) the money supply.

D) wages and prices.

Correct Answer: D

The provided content states that 'flexible wages and prices will adjust to restore full employment.' This is the central mechanism for the long-run self-correction process in the absence of policy actions.

Following a negative shock to short-run aggregate supply that creates a recession, what is the long-run response of output and the price level as the economy self-adjusts?

A) Output returns to the full-employment level, and the price level returns to its original level.

B) Output returns to the full-employment level, but the price level remains permanently higher.

C) Output remains below the full-employment level, and the price level returns to its original level.

D) Both output and the price level remain at their new, post-shock levels.

Correct Answer: A

A negative SRAS shock causes higher unemployment and a higher price level (stagflation). The resulting high unemployment will eventually cause nominal wages to fall. This fall in input costs shifts the SRAS curve back to the right, restoring both the original full-employment output and the original price level.

In the long run, after the economy has fully adjusted to a positive aggregate demand shock, which of the following is true?

A) The price level is higher, and output is higher than the original full-employment level.

B) The price level is higher, and output has returned to the full-employment level.

C) The price level is lower, and output has returned to the full-employment level.

D) Both the price level and output have returned to their original levels.

Correct Answer: B

A positive AD shock initially raises both output and the price level. The resulting low unemployment pushes nominal wages up, shifting the SRAS curve to the left. The final long-run equilibrium is at the original full-employment level of output (on the LRAS curve) but at a permanently higher price level.

If nominal wages and prices are not fully flexible and are 'sticky' downwards, what is the implication for the long-run self-adjustment process following a negative aggregate demand shock?

A) The economy will adjust back to full employment more quickly.

B) The adjustment process will be prolonged, and the economy may remain below full employment for an extended period.

C) The long-run aggregate supply curve will shift to the left permanently.

D) The aggregate demand curve will automatically shift back to the right to compensate.

Correct Answer: B

The entire premise of long-run self-adjustment relies on 'flexible wages and prices.' If wages are sticky and do not fall easily in response to high unemployment, the short-run aggregate supply curve will not shift to the right to close the recessionary gap. This means the economy will remain stuck with high unemployment and low output for a longer time.

The long-run self-adjustment mechanism explains how, in the absence of policy, the economy responds to shocks by returning to...

A) the full-employment level of output.

B) a zero percent unemployment rate.

C) the original price level, regardless of the shock.

D) a balanced government budget.

Correct Answer: A

The provided content emphasizes that 'flexible wages and prices will adjust to restore full employment.' The full-employment level of output is represented by the long-run aggregate supply curve, which is the target the economy returns to after a short-run shock.