AD/AS Assignment Name_________________________________________ Sort the following based on whether they will affect Aggregate Demand or Aggregate Supply. Remember, Aggregate Demand includes any products that would count towards GDP (C+I+G+(X-M)), and Aggregate Supply includes existing (not new) resources (factors of production). A factory producing computers A company builds a new factory A printing press A US company buys coffee beans from South America Trees A woman buys a hamburger for her little boy A corn field Students purchase tickets for a rock concert A woman buys a new car An inventor A coal mine A farmer buys some fertilizer A shoe salesperson A Dentist The government sends a woman to the moon Two newlyweds buy a house A US company sells a jet to a foreign company A tractor The government purchases a new submarine Aggregate Demand Aggregate Supply
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Review the problem in the Work It Out titled "Interpreting the AD/AS Model." Like the information provided in that feature, Table 10.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia. \begin{equation}\begin{array}{c|c|c}\hline \text { Price Level } & \text { AD } & \text { AS } \\\hline 110 & 700 & 600 \\\hline 120 & 690 & 640 \\\hline 130 & 680 & 680 \\\hline 140 & 670 & 720 \\\hline 150 & 660 & 740 \\\hline 160 & 650 & 760 \\\hline 170 & 640 & 770 \\ \hline\end{array}\end{equation} a. Plot the AD/AS diagram from the data. Identify the equilibrium. b. Imagine that, as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?
Dynamic aggregate demand (AD) can be derived using the quantity theory of money: Label the equation SO that it accurately expresses the quantity theory of money in dynamic form: growth in the money supply Answer Bank unemployment growth in velocity inflation real economic growth marginal propensity to save Suppose that the velocity of money is stable, 4% real economic growth is occurring, the rate of inflation is 4%, unemployment is 5.3%, and the marginal propensity to save is 3%. By how much is the money supply growing? Enter your answer as a percentage.
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