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assign #5 - XiangyingWu SUID:601936205 ECN203Assignment#5 1...

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Xiangying Wu SUID:601936205 ECN 203     Assignment #5 1. The decrease of the price of energy resulted in an increase of Short-Run Aggregate  Supply as a rightward shift of the Short-Run Aggregate Supply Curve. As the graph  shown above, the equilibrium real GDP increases from Y* to Y *’ , and the equilibrium  price level decreases from P *  to P *’ 2. Two possible reasons why consumption decreases: a) Consumer confidence   (Consumers are pessimistic about the economy and  personal financial situation) b) Wealth (Consumers become poor) 3. 
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The increase in taxes without any change in government purchases of goods and  services   will   result   in   a  decrease   in   (G-T).   Therefore,   this   leads   a   decrease  in  consumption   which   makes   a   decrease   in   Aggregate   Demand.   As   a   result,   the  Aggregate Demand shifts leftward. As the graph shown above, the equilibrium real 
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