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Ch11answers - CHAPTER 11 AGGREGATE SUPPLY AND DEMAND...

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AGGREGATE SUPPLY AND DEMAND PROBLEMS 1. Illustrate these events with AS and AD shifts: a. Government increases defense spending. b. The Headline story on p. 263. c. Imported raw materials get cheaper. d. Congress cuts corporate income tax. a. An increase in government spending would shift AD from AD A to AD B. b. The Headline story on p. 263 would result in a shift from AD B to AD A . A decline in wealth results in shifting AD from AD B to AD A. c. Imported raw materials are a factor of production and thus affect AS. A decrease in the price of imported raw materials will result in shifting AS from AS A to AS B. d. A cut in corporate income taxes is a supply side cut and would result in shifting AS from AS A to AS B . CHAPTER 11 AS A AS B AD B AD A Real Output Price Level
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2. Based on the Headline on p. 264: a. Illustrate the AS shift that occurs. b. Identify the old (E o ) and the new (E 1 ) macro equilibrium. c. What macro ailments result? d.
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Ch11answers - CHAPTER 11 AGGREGATE SUPPLY AND DEMAND...

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