4. Briefly explain why each of the following would cause the Aggregate Demand curve to shift to the right(an increase), or to the left(a decrease):I.  rapidly growing economies of our trading partnersII.  a planned increase in spending by the Federal Government for Infrastructure Investment

8. Which of the following explain why the Aggregate Demand curve is downward sloping?       a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending.     b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods.     c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline.     d) All of the above.     e) None of the above. 9. Which of the following explain why the Aggregate Supply curve is upward sloping?…

The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $4 trillion. The curves are labeled a, b, c, and d. Three points on the graph are also indicated by grey stars and labeled X, Y, and Z. PRICE LEVEL AD 160 150 140 130 120 LRAS 110 B 100 90 80 0 Description с 1 d X 2 3 6 4 5 REAL GDP (Trillions of dollars) SRAS if the expected price level is 120 Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. SRAS if the expected price level is 140 SRAS if the expected price level is 110 a O O O O O b 7 O O O с b O O 8 d O O O O O Not Shown ? O O O O O Suppose the economy is currently in short-run equilibrium at point Z. In this case, the economy is producing at an output level…

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Match each definition to the appropriate component of aggregate demand. Definition The sum of the expenditures of business firms on new plant, equipment, and software and of households on new homes The goods and services purchased by all levels of government The total amount spent by consumers on newly produced goods and services The difference between exports and imports ⒸNet exports O Government spending Consumer Expenditure Which of the following components represents the largest piece of aggregate demand? O Consumer expenditure O Investment spending O Which of the following components represents the smallest piece of aggregate demand? O Consumer expenditure O Government spending O Investment spending ONet exports Investment Spending Government Spending Net Exports O O O O

The following graph depicts a macro equilibrium. Answer the questions based on the information in the graph (d) If the multiplier were equal to 4, how much additional investment would be needed to increase aggregate demand by the amount of the initial GDP gap?(e) Illustrate the changes in autonomous investment and induced consumption that occur in(d).(f) What happens to prices when aggregate demand increases by the amount of the initial GDP gap?

Worksheet 5: Aggregate Supply and Aggregate Demand Complete the questions below. Be sure to show your work. Upload this worksheet to Moodle. Consider the following Aggregate Supply and Aggregate Demand curves. 2. 3. D P 10 8 6 4 2 20 AS/AD 40 LRAS 60 80 140 SRAS AD Name: 100 120 GDP 4. Suppose the government increased spending (G). What would happen to Aggregate Demand? Draw the resulting curve, and mark a new equilibrium on the graph.

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11. The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economic Stimulus Act of Act of 2009) that combined would deliver about $700 2008 and the American Recovery and Reinvestment billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if MPC in the United States is 0.5. Then calculate the resulting change in real GDP arising from the $700 billion in payments. 76177 b. Illustrate the effect on real GDP with the use of a graph depicting the income-expenditure equilib- rium. Label the vertical axis “Planned aggregate spending, AE Planned" and the horizontal axis "Real GDP." Draw two…

The graph below shows, the aggregate demand and supply for the economy of Etrusca. a. Draw AD2 on the graph below assuming an increase of $60 in aggregate demand. Plot only the endpoints of the curve below b. What is the new level of equilibrium GDP? c. What is the new equilibrium price level? d. How much is the reduction in GDP due to the crowding out effect?