ECON 206: Problem Set 8 1) The two questions in Tutorial Problems 7 looked at how changes in different macroeconomic variables affected the interest rate and and aggregate income. This week we'll extend the changes to how they affect the aggregate demand curve. For b) - c) remember that this means that r does not affect C and I and so the IS curve exists but is not downward sloping. So now you need to know what this means for the slope of the AD curve. When r does affect C and I we get a downward sloping IS curve and a downward sloping AD curve. When r does not affect C and I we do not get a downward sloping IS curve. This means we also do not get a downward sloping AD curve. Once you have worked out what the AD curve looks like and why it looks like this, then you can answer b)-c). Remember to ask for help if you get stuck. a) Show on a diagram how the fiscal stimulus in Q1) of tutorial problems 7 affects the aggregate demand curve. b) What would the aggregate demand curve look like when people and businesses are