Macroeconomics Unit IV assessment
Question 1
What is a consumption function? Describe the graph of a consumption function and explain its shape. If total spending is consumption plus investment spending, how does an increase in the interest rate affect total spending?
Question 2
How is an aggregate demand curve derived? What would cause the aggregate demand curve to shift to the right?
Question 3
For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).
a. Households decide to save a smaller share of their disposable income.
b. There is an 8-week strike in the steel industry.
c. A drought in the Midwest causes poor wheat harvest.
d. The labor force participation rate increases.
Question 4
Explain what would cause the government purchases function to increase. Will a change in social security spending affect government purchases?
Question 5
Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?
This is the Text Book source that needs to be used on each question: McEachern, W. A. (2012). ECON Macro 3(3rd ed.). Mason, OH: South-Western.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.