Assignment Instructions/ Description
1. What are primary phases of the business cycle? How does inflation affect the economy's level of real output?2. How do changes in income affect consumption (and saving)?What are factors other than income that can affect consumption?3. How can changes in real GDP equilibrium occur in the aggregate expenditures model and how do these changes relate to the multiplier?How do economists integrate the public sector (government expenditures and taxes) into the aggregate expenditures model?4. What is aggregate demand (AD) and why is its downward slope the result of the real-balances effect, the interest-rate effect, and the foreign purchases effect?What is aggregate supply (AS) and why does it differ in the immediate short-run, the short-run, and the long-run?5. What are the purposes, tools, and limitations of fiscal policy?How does the cyclically adjusted budget reveal the status of U.S. fiscal policy?6. How do you apply the "extended" (short-run/long-run) aggregate demand (AD)-aggregate supply (AS) model to inflation, recessions, and economic growth?What is the relationship between short-run aggregate supply and long-run aggregate supply?7. What are alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures?Why do new classical economists believe the economy will "self-correct" from aggregate demand and aggregate supply shocks?
8. Supply-Side EconomicsWatch the "Supply-Side Economics" video. Consider the following as you watch: • Arthur Laffer argued through the Laffer Curve that excessive income tax rates reduced revenue by discouraging work. Milton Friedman expresses ambivalence toward such supply-side economics. What lessons did you learn from the discussions?9. Recall the readings and activities you have completed this week and describe the one or two points that were least clear to you. What questions do you have that would help you understand these points better?
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