12.AGGREGATE DEMAND AND AGGREGATE SUPPLY
a. What is the economic reason why the SRAS curve slopes up?
b. Name some factors that could cause AD to shift, and saywhether they would shift AD to the right or to the left.
c. Would a shift of AD to the right tend to make the equilibriumquantity and price level higher or lower? What about a shift of ADto the left?
d. Suppose concerns about thesize of the federal budget deficitlead the U.S. Congress to cut all funding for research anddevelopment for ten years. Assuming this has an impact ontechnology growth, what does the AD/AS model predict would be thelikely effect on equilibrium GDP and the price level?
e. Suppose Mexico, one of our largest trading partners andpurchaser of a large quantity of our exports, goes into arecession. Use the AD/AS model to determine the likely impact onour equilibrium GDP and price level.
f. What impact would decrease in the size of the labor forcehave on GDP and the price level according to the AD/AS model?
g. Suppose the Federal Reserve increases the supply of money.What impact would that have on GDP, unemployment, andinflation?
Note: these questions are based on OpenStack, Chapter 11(link onCanvas). You are recommended to draw the relevant AD & AS graphto accompany each answer.
