--%>

Aggregate demand or aggregate supply

Determine affects that each of the following have on aggregate demand or aggregate supply?  In each of the case employ a diagram to illustrate the expected effects on the equilibrium price level and level of real output. Suppose that all other things remain constant.a. An extensive fear of depression on the part of consumers.

b. A $2 rise in the excise tax on a pack of cigarettes.

c. A drop in interest rates at each price level.

d. A major raise spending for health care in federal.

e.The expectation of fast inflation.

f. The complete disintegration of OPEC, causing oil prices to drop by one-half.

g. A 10 percent drop in personal income tax rates.

h. A sizable raise in labour productivity (Along with no change in nominal wages).

i. A 12 percent raise in nominal wages (Along with no change in productivity).

j. Reduction in the international value of the dollar.

E

Expert

Verified

(a) AD curve left, output down, and price level down (Supposing no ratchet effect).

(b) AS curve left, output down, and price level increase.

(c) AD curve right, output and price level increase.

(d) AD curve right, output and price level increase (any actual improvements in health care resulting from the spending would finally increase productivity and shift AS right).

(e) AD curve right, output and price level increase.

(f)  AS curve right, output increase and price level decrease.

(g) AD curve right, output and price level increase.

(h) AS curve right, output increase and price level decrease.

(i)  AS curve left, output down and price level increase.

(j)  AD curve right (enhanced net exports); AS curve left (higher input prices)

   Related Questions in Finance Basics

  • Q : How cash and capital budget relate to

    Describe how the cash budget and the capital budget associate to proforma financial statements.The cash budget illustrates the projected flow of cash in and out of the firm for particular time periods. The capital budget illustrates planned expe

  • Q : Value $100 is received at the beginning

    $100 is received at the beginning of year 1, $200 is received at the beginning of year 2, and $300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is

  • Q : Define Reimbursements Reimbursements :

    Reimbursements: The amount received as a payment for the cost of services executed, or of other expenditures made for, or on behalf of, other entity (example, one department reimbursing the other for administrative work executed on its behalf). Reimbu

  • Q : What is Working Capital and Revolving

    Working Capital and Revolving Fund: For legal base accounting purposes, fund categorization for funds employed to account for the transactions of self-supporting enterprises which render goods or services for a direct charge to the user that is genera

  • Q : What do you mean by Authorized What do

    What do you mean by Authorized: Provided the force of law (example, by statute). For certain action or quantity to be authorized, it should be possible to recognize the enabling source and date of approval.

  • Q : Define Trigger Trigger : An event which

    Trigger: An event which causes an action or actions. The triggers can be active (like pressing the update key to validate input to a database) or passive (like a tickler file to repeat of an activity). For illustration, budget "trigger" mechanisms hav

  • Q : Financial strategy describe the sales

    describe the sales forecasting process ?

  • Q : Would there be positive interest rates

    Normal 0 false false

  • Q : Major effects of this price floor

    Normal 0 false false

  • Q : Clarify retained earnings and its

    Clarify retained earnings?  Describe importance of this? Retained earnings represent the sum of all the earnings available to common stockholders of a business at the time of its entire history, minus the tota