AD, AS, Unemployment and Inflation

Unit 8 Assignment: AD, AS, Unemployment and Inflation Student Name: In this Assignment, you will examine factors that affect Aggregate Demand (AD) and Aggregate Supply (AS). You will compute the rates of inflation using the U.S. Consumer Price Index (CPI) and then examine how the results impact nominal interest rates, inflation, disinflation, and deflation. Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment. In this Assignment, you will be assessed on the following outcome: MT445-4: Examine how U.S. macroeconomic indicators are used to gauge economic health. Determine whether each of the following would cause a shift of the aggregate demand (AD) curve, a shift of the aggregate supply (AS) curve, neither, or both. Which curve will shift, and in which direction? What will happen to aggregate output and the price level in each case? * The price level changes. * Which curve will shift? Neither of the curves. A price level change causes a movement along both curves. For example, in Aggregate Demand, a price rise causes a decline in money supply resulting in high interest rates and reduced investments or savings and income declines. On the Aggregate Supply, a price rise implies higher profits for companies thus increase in production level CITATION Gre181 \l 1033 (Mankiw, 2018). * Which direction does it shift? Not applicable * What will happen to aggregate output? Not applicable * What will happen to the price level? Not applicable b.Consumer confidence declines. * Which curve will shift? Aggregate Demand curve. A decline in confidence means the consumer is at risk of being unemployed hence develops the tendency to consume less and save for the future. Thus, this affects the demand side of the curve. * Which direction does it shift? The AD shifts to the left. Reduced consumer confidence leads to consumer’s lowered expenditure and investment shifting the AD to the left. * What will happen to aggregate output? The output level declines as there are no buyers in the market. Consumer expenditure ...