Question: 1- How does an increase in aggregate demand affect output, unemployment, and the price level in the short run? 2- Identify which expenditure category each

1- How does an increase in aggregate demand affect output, unemployment, and the price level in the short run?

2- Identify which expenditure category each of the following will directly impact, and also which direction the U.S. aggregate demand curve will shift as a result.

a. Incomes increase abroad.

b. Interest rates decrease.

c. Congress passes a permanent tax cut.

d. Firms become more optimistic about the outlook for the economy.

e. Stocks traded on the NASDAQ market lose 40 percent of their value in one month's time.

3- If retailers such as Wal-Mart and Target find that inventories are rapidly being depleted, would it have been caused by a rightward or a leftward change in the aggregate demand curve? What are the likely consequences for output and investment?

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