QUESTION 38 48 44 40 36 32 28 24 20 16 12 8 4 0 E,Q I 0 8 16 24 32 40 AE2 AE1 Q 38. Which of the following could have caused a shift of the Aggregate Expenditures curve from AE1 to AE2? O a) an increase in the price level b) an increase in the rate of interest c) an increase in government purchases of goods and services d) a contractionary monetary policy

No written by hand solution

6. Keynesian demand-side versus supply-side effects Consider an economy operating below its full-employment output level. The government wants to enact a reduction in income taxes in an effort to restore the economy to full-employment output. On the graph that follows, shift one of the curves to illustrate the impact of the income tax cut on aggregate supply (AS) and aggregate demand (AD) that is emphasized by Keynesian economists. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE LEVEL REAL GDP (Billions of dollars) SRAS AD AD SRAS

1) What is a tariff? . . . . 2) If the price level goes down, the real value of money will: . Remain unchanged. Decrease. It can increase or decrease. Increase. . . 3) Which of the following is true? • The equilibrium interest rate varies inversely with money supply. The money supply varies inversely with the price level. The money supply varies directly with the price level. The equilibrium interest rate varies directly with money supply. . . . A limit imposed on the production or sale of a product. A maximum or minimum price placed on a product by government regulation. A restriction placed on the importation of foreign products. A tax or duty levied on imports. 4) What does macroeconomic equilibrium imply? . The point where the quantity of Real GDP demanded equals the quantity of Real GDP supplied. It is where the aggregate demand curve intersects the LAS curve. • Full employment GDP. It is possible only at various price levels. The point where Real GDP is at capacity. . . .