3. What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant.
A. A widespread fear of depression on the part of consumers.
B. A $2 increase in the excise tax on a pack of cigarettes.
C. A reduction in interest rates at each price level.
D. A major increase in Federal spending for health care.
E. The expectation of rapid inflation.
F. The complete disintegration of OPEC, causing oil prices to fall by one-half.
G. A 10 percent reduction in personal income tax rates.
H. A sizable increase in labor productivity (with no change in nominal wages).
I. A 12 percent increase in nominal wages (with no change in productivity).
J. Depreciation in the international value of the dollar.
3. What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant.
A. A widespread fear of depression on the part of consumers.
B. A $2 increase in the excise tax on a pack of cigarettes.
C. A reduction in interest rates at each price level.
D. A major increase in Federal spending for health care.
E. The expectation of rapid inflation.
F. The complete disintegration of OPEC, causing oil prices to fall by one-half.
G. A 10 percent reduction in personal income tax rates.
H. A sizable increase in labor productivity (with no change in nominal wages).
I. A 12 percent increase in nominal wages (with no change in productivity).
J. Depreciation in the international value of the dollar.
