Reference no: EM131079624
What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output, assuming that the price level is flexible both upward and downward.
a. A widespread fear by consumers of an impending economic depression.
b. A new national tax on producers based on the value-added between the costs of the inputs and the revenue received from their output.
c. A reduction in interest rates at each price level.
d. A major increase in spending for health care by the federal government.
e. The general expectation of coming rapid inflation.
f. The complete disintegration of OPEC, causing oil prices to fall by one-half.
g. A 10 percent across-the-board reduction in personal income tax rates.
h. A sizable increase in labor productivity (with no change in nominal wages).
i. A 12 percent increase in nominal wages (with no change in productivity).
j. An increase in exports that exceeds an increase in imports (not due to tariffs).
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