Chapter 5 1. Starting from full-employment equilibrium, indicate whether each of the following factors will affect aggregate demand (AD) or aggregate supply (AS) and whether the effect would be an increase or a decrease. Then, indicate what will happen to the price level and the level of real GDP and what type of equilibrium will result: a) A decrease in interest rates Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium: inflationary or recessionary b) An improvement in technology Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium: inflationary or recessionary c) An increase in the exchange rate Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium: inflationary or recessionary d) A decrease in government spending Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium: inflationary or recessionary e) An increase in the money supply Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium; inflationary or recessionary f) An increase in the nominal wage rate Increase or Decrease, AD or AS, Price Level: increase or decrease Real GDP: increase or decrease Type of equilibrium: inflationary or recessionary