Macroeconomics: AD / AS REVIEW

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.  Click HERE for answers, BUT only after you have done the problems yourself!

1. Assume that there is an increase in government spending

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

2. Assume that there is an increase in taxes

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

3. Assume that there is reduced gov’t red tape

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

 

4. Assume that there is an increase in business investment

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

5. Assume that there is an increase in oil prices due to war

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

 

6. Assume that the Fed decreases the money supply

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

7. Assume that there is new technology that reduces electricity costs

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

8. Assume that exports increase

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

9. Assume that there is a decrease in marginal tax rates which increases labor productivity

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

 

10. Assume that there is an poor harvests world wide which increases resource prices

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

11. Assume that there is a rise in the foreign exchange value of the dollar

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

12. Assume that there is an increase in labor training and education

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

13. Assume that there is an increase in consumer debt

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

 

14. Assume that there is a decrease in consumer confidence

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

15. Assume that there is an recessions in Europe, Japan, and Canada

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

16. Assume that there are discoveries of new oil fields

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

17. Assume that there is an increase in interest rates not caused by price level changes

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

 

 

18. Assume that there is a decrease in the amount of money in circulation

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

19. Assume that there is an international agreement to make businesses reduce pollution

Which determinant? ____________

D AD or D AS?

 

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]

 

 

 

 

 

20. Assume that there is an more competition due to fewer trade restrictions

Which determinant? ____________

D AD or D AS?

What happens to:

Price Level _______________

Real GDP _______________

Inflation _______________

Unemployment _______________

Economic Growth _______________

[D GDP or D potential GDP ?]