Question: Part 2 - Aggregate Demand ( AD ) and Aggregate Supply ( AS ) 1 8 . Use the AD / AS model to illustrate

Part 2- Aggregate Demand (AD) and Aggregate Supply (AS)
18. Use the AD/AS model to illustrate the following. Draw 6 graphs by hand. Show how the AD or the AS curve shift and in what direction (left or right). Also state what happens to equilibrium real GDP (Y), employment, and the equilibrium price level. [Note: Use the SRAS curve, not the LRAS.]
a. an increase in government spending and/or transfer payments
b. restrictive fiscal policy
c. expansive monetary policy
d. increase in investment according to Keynesians
e. increase in investment according to supply-side economists
f. a stock market crash
19. In the following figure, the economy is initially in equilibrium at full-employment at point "e". Assume that consumption falls by 100 leading to a shift in AD from AD1 to AD2.
 Part 2- Aggregate Demand (AD) and Aggregate Supply (AS) 18. Use

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!