1.)
Explain effect of each of the following on either the short-run
aggregate supply (SAS) curve or the aggregate demand (AD) curve.
a.) Deterioration in business expectations
b.) The 2008 global financial crisis leads to a decrease in
wealth.
c.) Decrease in nominal wage rate
d.) Oil prices increase dramatically
e.) Deterioration in consumer expectations
2.) For an economy in which government expenditures is $100
billion, exports are $60 billion, imports are 15 percent of real
GDP, autonomous consumption is $250 billion, investment is $350
billion, and the marginal propensity to consume is 0.75,
a.) derive the equation for the aggregate expenditure (AE)
curve
b.) What are the values of the slope and the vertical axis
intercept of the AE curve
c.) what is the multiplier
d.) if investment rises to $450 billion, what will be the new
equilibrium real GDP?
e.) what is the impact on balance of trade in (d)?