1. Explain how the real balance effect works?
2. How will either the AD curve or SRAS curve shift as a result of each of the following changes:
A rise in the interest rate
An adverse supply shock
A rise in wealth
3. Explain what happens to U.S. net exports and U.S. aggregate demand as the dollar depreciates
4. Explain what happens to aggregate demand in each of the following cases: (a) The interest rate rises; (b) Wealth falls; (c) The dollar depreciates relative to foreign currencies; (d) Households expect lower prices in the future; (e) Business taxes rise.
5. Explain how expectations about future sales will affect investment.
6. Explain how each of the following can affect short-run aggregate supply: (a) An increase in wage rates; (b) A beneficial supply shock; (c) An increase in the productivity of labor; (d) A decrease in the price of a nonlabor resource (such as oil).
(a) An increase in SRAS that is greater than the increase in AD will lead to an increase in Real GDP and a fall in the price level.
(b) A decrease in AD that is greater than the increase in SRAS will lead to a fall in both the Real GDP and the price level.
(c) An increase in SRAS that is less than the increase in AD will lead to an increase in both the
1. Explain how the real balance effect works?
2. How will either the AD curve or SRAS curve shift as a result of each of the following changes:
A rise in the interest rate
An adverse supply shock
A rise in wealth
3. Explain what happens to U.S. net exports and U.S. aggregate demand as the dollar depreciates
4. Explain what happens to aggregate demand in each of the following cases: (a) The interest rate rises; (b) Wealth falls; (c) The dollar depreciates relative to foreign currencies; (d) Households expect lower prices in the future; (e) Business taxes rise.
5. Explain how expectations about future sales will affect investment.
6. Explain how each of the following can affect short-run aggregate supply: (a) An increase in wage rates; (b) A beneficial supply shock; (c) An increase in the productivity of labor; (d) A decrease in the price of a nonlabor resource (such as oil).
(a) An increase in SRAS that is greater than the increase in AD will lead to an increase in Real GDP and a fall in the price level.
(b) A decrease in AD that is greater than the increase in SRAS will lead to a fall in both the Real GDP and the price level.
(c) An increase in SRAS that is less than the increase in AD will lead to an increase in both the