Homework 5: Supply & Demand - Economics 312 Name(s Fall 2013 Homework#5 1 Please define the following terms or concepts(3 points a Aggregate Demand

Homework 5: Supply & Demand - Economics 312 Name(s Fall...

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Economics 312 Fall 2013 Name(s) Homework #5 1.Please define the following terms or concepts: (3 points)a.Aggregate Demandb.Aggregate Supplyc.Natural Rate of Outputd.Stagflatione.IS-LM Modelf.Theory of Liquidity Preference2.Graphically derive an aggregate demand curve from an aggregate expenditure curve. (5 points)3.Show using aggregate supply and demand analysis the effects of the following temporaryshocks. Be sure to include any change to business cycle activity on your graph. (20 points)a.An increase in consumer spending. b.An increase in the price of oil.c.An increase in the interest rate.d.A decrease in real wages.e.Firms deciding to increase their planned investment.4.According to the International Fusion Energy Organization the development of a lithium fusion reactor could produce abundant and low cost energy for over 3000 years. Assume the US was successful in developing this energy source, show using aggregate supply anddemand analysis the effect on real GDP. (5 points)

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