16 Questions total - 8 Micro & 8 Macro

1. For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these). a. Households decide to save a smaller share of their disposable income. b. There is an 8-week strike in the steel industry. c. A drought in the Midwest causes poor wheat harvest. d. The labor force participation rate increases.

2. Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?

3. Explain what would cause the government purchases function to increase. Will a change in social security spending affect government purchases?

4. What is a consumption function? Describe the graph of a consumption function and explain its shape. If total spending is consumption plus investment spending, how does an increase in the interest rate affect total spending?

5. How is an aggregate demand curve derived? What would cause the aggregate demand curve to shift to the right?

6. Addition question. Does not have to be a certain amount of words. Just answered:

The AS curve does not describe the same kind of relationship between price and quantity as a microeconomic supply curve, why? Optional: It has been said that U.S. citizens do not have much propensity to save, and the low interest on savings accounts may be a reason. What would happen to the economy if, all else remaining the same, savings interest increased enough that we would have greater propensity to save? What aspects of the economy would be affected?

Instructions: I need each question (5 questions) answered in 75 words or greater. The additional question (6) doesn’t have a word limit but it does not need to be long. There are also 2 case study questions attached as a PDF file to the homework (not in this word document) that need to be answered that also need to be at least 75 words. There are a total of 8 questions being asked. I need the book that is being used to be referenced in APA format. The book being used is ECON MACRO 3 by William A. McEachern. I need these back Saturday (3/23) by 9:00pm so that I have time to read over and submit them. 9:00 EST.