Question: Part 2 - Aggregate Demand ( AD ) and Aggregate Supply ( AS ) 1 8 . Use the AD / AS model to illustrate
Part Aggregate Demand AD and Aggregate Supply AS
Use the ADAS model to illustrate the following. Draw 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 andor transfer payments
b restrictive fiscal policy
c expansive monetary policy
d increase in investment according to Keynesians
e increase in investment according to supplyside economists
f a stock market crash
In the following figure, the economy is initially in equilibrium at fullemployment at point Assume that consumption falls by leading to a shift in AD from AD to AD
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