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Need some help with Macroeconomics.. Want 10 points? Any help will do?

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What effects would each of the following have on aggregate demand or aggregate supply?

In each case state where the aggregate demand effected and in which direction or the aggregate supply is effected and in which direction. Assume all other things remain constant.

e. A major cut in Federal spending for health care.

f. The expectation of a rapid rise in the price level.

g. The complete disintegration of OPEC, causing oil prices to fall by one-half.

h. A 10 percent reduction in personal income tax rates.

i. An increase in labor productivity.

j. A 12 percent increase in nominal wages (with no change in productivity).

k. Depreciation in the international value of the dollar.

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2 ANSWERS


  1. e - fall in aggregate demand

    f - fall in short-run aggregate supply and increase in short-run aggregate demand

    g - increase in aggregate supply

    h - increase in aggregate demand and increase in aggregate supply through higher investments

    i - increase in aggregate supply

    j - fall in aggregate supply (higher costs)

    k - higher aggregate demand (rise in exports and fall in imports)


  2. It's late here's some help, only answering the ones I'm positive on.

    Well, Aggregate demand can also be defined as AE = C + I + G + NX.

    e and h are the same.  if there is a cut to federal spending, then all other things being equal, the AD will fall.  Shifting it to the left.

    k. with the depreciation of the dollar there will be higher exports and lower imports giving us a larger AE.  AD will rise shifting it to the right.

    I'll answer more tomorrow if I have time.

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