Use the graphs and the other information provided to answer the questions. BEFORE answering the questions DRAW the appropriate shifts on the graphs and use the graphs to FIND the answers

1. Assume that there is an increase in government spending Which determinant? _____ G______ AD or AS? or ?  Answer: AD   What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Achieving potential GDP (AD)

2. Assume that there is an increase in taxes Which determinant? ____ TAXES_______ AD or AS? or ?  Answer: AD   What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation ___ (RATCHET EFFECT) Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

3. Assume that there is reduced gov't red tape Which determinant? __ Gov't regulation ____ AD or AS? or ?  Answer: AS   What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Increasing potential GDP (AS)

4. Assume that there is an increase in business investment Which determinant? ____ I______ AD or AS? or ? Answer: AD   What happens to: Real GDP _______________ Unemployment ______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Achieving potential GDP (AD)

5. Assume that there is an increase in oil prices due to war Which determinant? PRICE OF RESOURCES AD or AS? or ? Answer: AS   What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

6. Assume that the Fed decreases the money supply Which determinant? ______ MS _____ AD or AS? or ? Answer: AD   What happens to: Real GDP _______________ Unemployment ______________ Price Level _______________ Inflation _(RATCHET EFFECT)_ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

7. Assume that there is new technology that reduces electricity costs Which determinant? _ PRICE OF RESOURCES_ AD or AS? or ? Answer: AS   What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Increasing potential GDP (AS)

8. Assume that exports increase Which determinant? _____ Xn _____ AD or AS? or ? Answer: AD What happens to: Real GDP _______________ Unemployment _______________ Price Level ______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Achieving potential GDP (AD)

9. Assume that there is a decrease in marginal tax rates which increases labor productivity Which determinant? _ PRODUCTIVITY _ AD or AS? or ? Answer: AS What happens to: Real GDP ______________ Unemployment ______________ Price Level ______________ Inflation ______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Increasing potential GDP (AS)

10. Assume that there is an poor harvests world wide which increases resource prices Which determinant? _ PRICE OF RESOURCES __ AD or AS? or ? Answer: AS What happens to: Real GDP ______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth ______________ If EG: Achieving potential GDP or increasing potential GDP ?

11. Assume that there is a rise in the foreign exchange value of the dollar Which determinant? ____ Xn ______ AD or AS? or ? Answer: AD What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

12. Assume that there is an increase in labor training and education Which determinant? __ PRODUCTIVITY _ AD or AS? or ? Answer: AS What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Increasing potential GDP (AS)

13. Assume that there is an increase in consumer debt Which determinant? _____C _____ AD or AS? or ? Answer: AD   What happens to: Real GDP _______________ Unemployment ______________ Price Level __ (RATCHET EFFECT)__ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

14. Assume that there is a decrease in consumer confidence Which determinant? _____C ______ AD or AS? or ? Answer: AD What happens to: Real GDP _______________ Unemployment _______________ Price Level __ (RATCHET EFFECT)_ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

15. Assume that there is an recessions in Europe, Japan, and Canada Which determinant? _____Xn ___ AD or AS? or ? Answer: AD   What happens to: Real GDP _______________ Unemployment _______________ Price Level _ (RATCHET EFFECT)_ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ?

16. Assume that there are discoveries of new oil fields Which determinant? _ PRICE OF RESOURCES_ AD or AS? or ? Answer: AS What happens to: Real GDP _______________ Unemployment _______________ Price Level _______________ Inflation _______________ Economic Growth _______________ If EG: Achieving potential GDP or increasing potential GDP ? Increasing potential GDP (AS)

17. Assume that there is an increase in interest rates not caused by price level changes Which determinant? ____MS ______ AD or AS? or ? Answer: AD  What happens to: Real GDP ______________ Unemployment _____________ Price Level _ (RATCHET EFFECT)_ Inflation ______________ Economic Growth ______________ If EG: Achieving potential GDP or increasing potential GDP ?

18. Assume that there is a decrease in the amount of money in circulation Which determinant? _____MS _____ AD or AS? or ? Answer: AD   What happens to: Real GDP ______________ Unemployment _____________ Price Level _ (RATCHET EFFECT)_ Inflation ______________ Economic Growth _____________ If EG: Achieving potential GDP or increasing potential GDP ?

19. Assume that there is an international agreement to make businesses reduce pollution Which determinant? __RED TAPE_____ AD or AS? or ? Answer: AS   What happens to: Real GDP _____________ Unemployment ______________ Price Level ______________ Inflation _____________ Economic Growth ______________ If EG: Achieving potential GDP or increasing potential GDP ?

20. Assume that there is an more competition due to fewer trade restrictions Which determinant? _PRODUCTIVITY_ AD or AS? or ? Answer: AS  What happens to: Real GDP _____________ Unemployment ______________ Price Level _____________ Inflation ____________ Economic Growth _____________ If EG: Achieving potential GDP or Increasing potential GDP ? Increasing potential GDP (AS)