3.1- Aggregate Demand Practice Part 1 - Practice - For each of the following situations, identify the determinant (shifter) and indicate if the aggregate demand (AD) would most likely increase, decrease, or not change Situation Determinant of AD Change in AD 1. Congress cuts personal income taxes by $20 million. 2. Interest rates increase causing a decrease in capital stock 3. Consumer confidence declines and people fear a recession. 4. Stock market collapses causing the loss of millions of dollars of assets + 5. The price level increases by 5%. 6. Defense spending is increased due to military conflicts abroad 7. The government raises taxes and cuts spending in attempt to balance its budget. 8. Future business expectations are predicting growth for most US industries. 9. Interest rates decrease from 5% to 2% 10. Incomes increase for US trading partners Canada and China Part 2 - Draw It - For the following scenarios, show the effect on aggregate demand. 11. Government spending decreases 12. The stock market skyrockets