Aggregate Supply and Demand

EQUILIBRIUM

AGGREGATE SUPPLY

AGGREGATE DEMAND

or Real GDP

Using the scenarios, determine the following:

Does AD or AS shift?

Left or right?

What happens to equilibrium? (Price and GDP)

AGGREGATE DEMAND1) The government decides to decrease the basic percentage rate of income tax from 20% to 18%

2) Consumers feel optimistic because of increase in value in the stock Market

3) Businesses are expanding and hiring more workers

4) The government eliminates welfare programs

5) Unemployment is decreasing at the fastest rate in history

6) A natural disaster has limited the disposable income of consumers in California

7) Consumers are worried about inflation rates and start saving rather than spending

8) Sales tax-free weekend enforced nation-wide.

9) The government builds parks

or Real GDP

AD2

AD1AD3

AS1

AGGREGATE SUPPLY1) The government announces a 10% rise in the value of the national minimum wage

2) There is a fall in the global price of oil from $100 a barrel to $80 a barrel

3) There is a 5% decrease in average wage rates

4) Forest fires destroy most of the potential for construction projects

5) The six major energy suppliers in the UK announce a 15% rise in the retail price of gas and electricity for US businesses

6) A fall in the cost of semi conductor chips used in the computer industry and other related industries

7) Truck drivers negotiate for 30% increase in wages

8) A new oil pipeline has been finished and makes access to oil much easier

9) Internet crashes across the country and makes economic transactions impossible

or Real GDP

AD1

AS2

AS1AS3