QUESTION 3 Why does a small difference in the economic growth rate lead to big d

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QUESTION 3 Why does a small difference in the economic growth rate lead to big differences over time? O because of the power of compounding. O because of the power of linear growth O because of differences in the methods used to estimate GDP growth O because of differences in total population among countries QUESTION 4 Indicate what effect the following would have on aggregate demand or aggregate supply (short-run or long-run): A widespread fear by consumers of an impeding economic depression. Aggregate Demand Increase O Aggregate Demand Decrease O Aggregate Supply Increase Aggregate Supply Decrease QUESTION 5 Indicate what effect the following would have on aggregate demand or aggregate supply (short-run or long-run) A new national tax on producers based on the value-added between the costs of the inputs and the revenue received from their output Aggregate Demand Increase Asgregate Demand Decrease Aggregate Supply Increase Agpregate Supply Decrease QUESTION 6

Explanation / Answer

3. because of the power of compounding

4. Aggregate demand decreases

When consumers think that there will be depression they start saving more and spending less which decreases aggregate demand of goods and service.

5. Aggregate supply decreases

National tax increases cost of production of goods and services which reduces supply of commodity by the firms. As a result, AS shifts leftwards.

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