Scribd
Upload
139 views

AS AD Worksheet: Part I: Aggregate Demand Questions

This document provides an overview of aggregate demand and aggregate supply concepts through a series of questions and graphs. It introduces the aggregate demand equation and explores how shifts in its components (C, I, G, NX) impact the overall level of aggregate demand. It then examines how changes such as increases in productivity, oil prices, and skilled immigration impact aggregate supply. The document tests the reader's understanding of how aggregate supply and demand shifts influence macroeconomic indicators like GDP, price levels, unemployment and the business cycle. Finally, it uses aggregate supply and demand graphs to explain the "mystery" of stagflation in the 1970s compared to the 1960s.

Uploaded by

Kin
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
139 views

AS AD Worksheet: Part I: Aggregate Demand Questions

This document provides an overview of aggregate demand and aggregate supply concepts through a series of questions and graphs. It introduces the aggregate demand equation and explores how shifts in its components (C, I, G, NX) impact the overall level of aggregate demand. It then examines how changes such as increases in productivity, oil prices, and skilled immigration impact aggregate supply. The document tests the reader's understanding of how aggregate supply and demand shifts influence macroeconomic indicators like GDP, price levels, unemployment and the business cycle. Finally, it uses aggregate supply and demand graphs to explain the "mystery" of stagflation in the 1970s compared to the 1960s.

Uploaded by

Kin
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

AS AD Worksheet

Part I: Aggregate Demand Questions


AD= C+I+G+NX

1. Government increases expenditures on information technology


a. What is changing in this formula?: AD = C + I+ G + NX

b. Will AD increase or decrease?

c. Draw the shift below.

2. The US increases exports to other countries.


a. What is changing in this formula?: AD = C + I+ G + NX

b. Will AD increase or decrease?

c. Draw the shift below.

3. Consumers fear a recession and cut back on spending.


a. What is changing in this formula?: AD = C + I+ G + NX

b. Will AD increase or decrease?

c. Draw the shift below.

1
Part II: Aggregate Supply
4. Productivity increases across industries
a. Will aggregate supply increase or decrease?

b. Draw the shift below.

5. Oil prices rise, raising production costs for producers.


a. Will aggregate supply increase or decrease?

b. Draw the shift below.

6. Germany experiences a boom in the immigration of skilled workers


a. Will aggregate supply (in Germany) increase or decrease?

b. Draw the shift below.

Part III
Will AS or AD shift? Will it increase or decrease? Place a check mark under the correct boxes.

AS AD Increase Decrease
1. Increase in labor productivity due to
technological change.
2. Increase in the price of inputs used by many
firms.
3. Major decrease in business investment
spending.
4. Government reduces taxes on households.
5. Imports from other countries increase.
6. Labor supply decreases.

2
Part IV
1. In the space below, draw an AS/AD model. Show an increase in Aggregate Demand.

a. What happened to Real GDP?


b. What phase of the business cycle would the economy be in?
c. What is likely happening to unemployment?
d. What happened to price level?

2. In the space below, draw an AS/AD model. Show a decrease in Aggregate Demand.

a. What happened to Real GDP?


b. What phase of the business cycle would the economy be in?
c. What is likely happening to unemployment?
d. What happened to price level?

3. In the space below, draw an AS/AD model. Show an increase in Aggregate Supply.

a. What happened to Real GDP?


b. What phase of the business cycle would the economy be in?
c. What is likely happening to unemployment?
d. What happened to price level?

4. In the space below, draw an AS/AD model. Show a decrease in Aggregate Supply.

a. What happened to Real GDP?


b. What phase of the business cycle would the economy be in?
c. What is likely happening to unemployment?
d. What happened to price level?
Part V
Draw the impact on the AS/AD model for each scenario below. Determine the impact on Real GDP, price level, unemployment,
and the business cycle.

Scenario Graph It! Real GDP Price Unemployment Business


Level Cycle
1. Congress passes a tax cut for the middle
class and the president signs it.

2. Imports into the United States begin to


decline while exports out of the United
States rise.

3. Productions costs rise significantly in


many sectors of the economy.

4. Congress raises taxes on corporations.

5. People feel confident about the future of


the economy.
Part VI:

In the 1960s many newspaper reporters were accustomed to reporting a decrease in the unemployment rate when the
overall price level increased. However, in the 1970s, when increases in the overall price level were accompanied by
increases, not decreases, in the unemployment rate, some reporters went so far as to declare macroeconomics
“bankrupt” and unable to explain this “mystery.”

Using short-run aggregate demand and aggregate supply analysis, explain the “mystery” of why the increases in the
overall price level during the 1960s might have been accompanied by decreases in the unemployment rate and the
increases in the overall price level during the 1970s might have been accompanied by increases in the unemployment
rate.

Graph for the 1960s

Graph for the 1970s

You might also like