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Unformatted text preview: show how the equilibrium GDP and price level would be affected in the short run: 4.1 Consumer confidence increases and the consumption function shifts up. 4.2 The money supply increases, leading to a changed interest rate. (You will later learn that an increase in the money supply pushes the interest rate down and that in turn encourages investment spending. For now, just assume an increase in desired investment spending and consider what that does to AD/AS; after we introduce a money model you will be able to do this question completely). * 4.3 New technology makes workers far more productive* * Consider only one side of the market (i.e., shift only one curve the primary, initial impact, even though there could be an argument about shifting two!)....
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- Fall '08