Assignment

Using an aggregate demand and supply diagram (please graph) explain how each of the following scenarios affects the equilibrium price level and aggregate output. Is there a difference in the Short Run versus the Long Run?

a) Consumers expect a recession, while resource (input) prices rise at the same time.

b) Foreign income falls as domestic technology improves.

c) The government cuts taxes.

d) Government spending falls.

What are some solutions or ways for an economy to get out of a Recession or slow things down if we're growing to fast?

Has inflation affected you? Give some examples of items that you normally purchase and have noticed a definite increase or decrease in its price. Do you think this is due to demand-pull or cost-push inflation?