1. Which of the following changes will result in a shift of the aggregate demand curve, and which will result in a movement along the curve? If there is a shift, or a movement, be sure to explain in which direction, and why (either up or down, or, right or left). 1 pt each
a. The Fed lowers interest rates.
b. The price level in the economy falls.
c. Wealth decreases.
d. A foreign trading partner’s national income increases.
2. With a two panel diagram –one panel showing the aggregate expenditure diagram, and the other showing the AD curve – show how a decrease consumption shifts the AD curve.
2 pts
3. What will happen to the aggregate supply curve if the price of foreign oil decreases? Will it cause a movement along the curve or a shift of the curve? Explain clearly. 2 pts
4. Is there any difference between the aggregate demand curve and the demand curve for good x? Explain .