5. Other things equal what effects would each of the following have on aggregate

Question

5. Other things equal what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.
A. A reduction in the economys real interest rate.
B. A major increase in Federal spending for health care (with no increase in taxes)
C. The complete disintegration of OPEC causing oil prices to fall by one half.
D. A 10 percent reduction in personal income tax rates (with no change in government spending)
E. A sizable increase in labor productivity (with no change in nominal wages)
F. A 12 percent increase in nominal wages (with no change in productivity)
G. A sizable depreciation in the international value of the dollar.

Explanation / Answer

A

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