Aggregate Demand.docx - Unit 3 Aggregate Demand Assignment...

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Unit 3: Aggregate Demand AssignmentIntroduction: The graph below shows the aggregate demand in the United States at three different levels. Assume the economy starts at AD1. Once you are completed with all 10 questions, submit to the Unit 3: Aggregate Demand dropboxAssuming the economy begins at AD1, identify which AD curve will result from each of the changes described below.1. An increase in labor productivity causes household incomes to rise.a. New AD curve: AD3b. Explanation: National income rises due to household incomes rising and price staysconstant so the graph will shift right2. Per capita incomes abroad grow more rapidly than incomes at home:a. New AD curve: AD3b. Explanation: Per capita incomes grow causing the national income to increase asprice stays the same so the graph will shift right3. Lower energy costs cause the price level of domestically produced goods and services tofall.a. New AD curve: AD1b. Explanation: If domestically produced goods drop the price then income is lowered

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