Question: (1) Explain why a change in one component of aggregate demand will cause the aggregate demand curve to shift by a multiple of the initial

(1) Explain why a change in one component of aggregate demand will cause the aggregate demand curve to shift by a multiple of the initial change.

(2) Suppose nominal wages never changed. What would be the significance of such a characteristic?

(3) Explain the short-run impact of each of the following.

a. A discovery that makes cold fusion a reality, greatly reducing the cost of producing energy

b. An increase in the payroll tax

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