Question

need help with these not sure if i did them right

Answer 1

(1) (E)

Lower business expectations will cause firms to reduce business investment. As investment falls, aggregate demand falls, shifting AD curve leftward, which decreases both price level and RGDP.

(2) (E)

Higher business tax causes firms to lower production. Aggregate supply falls, shifting SRAS curve leftward, which increases price level and decreases RGDP.

(3) (D)

Lower interest rate increases investment. As investment rises, aggregate demand increases, shifting AD curve rightward, which increases both price level and RGDP.

(4) (B)

Increase in wealth increases consumption, which incraeses aggregate demand, shifting AD curve rightward, increasing price level and increasing RGDP. Increase in resource cost lowers aggregate supply, shifting SRAS leftward, increasing price level but decreasing RGDP. Net effect is a definite increase in price level. But net effect on RGDP is uncertain.