Problem 1
Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve? LO12.1
Problem 2
Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve? LO12.1
Problem 3
What assumptions cause the immediate-short-run aggregate supply curve to be horizontal? Why is the long-run aggregate supply curve vertical? Explain the shape of the short-run aggregate supply curve. Why is the short-run aggregate supply curve relatively flat to the left of thefull-employment output and relatively steep to the right? LO12.3
Problem 4
Explain how an upsloping aggregate supply curve weakens the realized multiplier effect from an initial change in investment spending. \(L O 12.6\)
Problem 6
Explain: "Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply." In each case, specify the price-level outcomes. LO12.6
Problem 7
Use shifts of the \(\mathrm{AD}\) and \(\mathrm{AS}\) curves to explain ( \(a\) ) the U.S. experience of strong economic growth, full employment, and price stability in the late \(1990 \mathrm{~s}\) and early \(2000 \mathrm{~s}\) and \((b)\) how a strong negative wealth effect from, say, a precipitous drop in house prices could cause a recession even though productivity is surging. LO12.6
Problem 8
In early 2001 investment spending sharply declined in the United States. In the two months following the September \(11,\) 2001 , attacks on the United States, consumption also declined. Use AD-AS analysis to show the two impacts on real GDP. \lfloor 012.6
Problem 9
LAST WORD What were the monetary and fiscal policy responses to the Great Recession? What were some of the reasons suggested for why those policy responses didn't seem to have as large an effect as anticipated on unemployment and GDP growth?
