Chapter 27, Problem 9P

To determine

a.

To explain:

The impact of change in Consumer confidence index and express whether it encourages economic growth.

Introduction: Consumer confidence index (CCI) is designed by the Conference Board in 1967 to ascertain the consumer willingness to buy goods and services in different economic situations. This index comprises many questions which can help to understand the economic condition from consumer’s point of view.

To determine

b.

To explain:

The Consumer confidence index (CCI) and its impact on aggregate demand and aggregate supply curve.

Introduction: Aggregate demand is the total demand of goods and services for a given price level in an economy. AD curve shows the inverse relationship between price level and aggregate output. Aggregate demand curve slopes is downward. Aggregate demand is the sum of consumption expenditure, investment expenditure, government expenditure and net exports.

Aggregate supply is the total product or output available in an economy at a particular price level. Aggregate supply curve slopes upward and it has positive relationship between the price level and aggregate supply.

To determine

c.

To explain:

The response of government for the time the economy is below potential output and the times it is above potential output.