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  • Intro To AD Shifts

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    The document describes a graph showing aggregate demand curves for the Swiss economy at three levels and poses 15 scenarios that could shift the aggregate demand curve. For each scenario, it asks to identify the new aggregate demand curve and explain the reasoning. The scenarios include changes in factors like labor productivity, inflation, government spending, household savings, and wages.

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    AD shifts IB economics

    Original Title

    Intro_to_AD_shifts

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    The document describes a graph showing aggregate demand curves for the Swiss economy at three levels and poses 15 scenarios that could shift the aggregate demand curve. For each scenario, it asks to identify the new aggregate demand curve and explain the reasoning. The scenarios include changes in factors like labor productivity, inflation, government spending, household savings, and wages.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    8 views3 pages

    Intro To AD Shifts

    Uploaded by

    stjepan
    The document describes a graph showing aggregate demand curves for the Swiss economy at three levels and poses 15 scenarios that could shift the aggregate demand curve. For each scenario, it asks to identify the new aggregate demand curve and explain the reasoning. The scenarios include changes in factors like labor productivity, inflation, government spending, household savings, and wages.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Introduction: The graph below shows the aggregate demand in Switzerland at three

    different levels.

    Assume the economy starts at AD1

    Assuming the economy begins at AD1, identify which AD curve will result from each of the
    changes described below.

    1. An increase in labor productivity causes household incomes to rise.

    a. New AD curve:

    b. Explanation:

    2. Per capita incomes abroad grow more rapidly than incomes at home:

    a. New AD curve:

    b. Explanation:

    3. Lower energy costs cause the price level of domestically produced goods and services to
    fall.

    a. New AD curve:
    b. Explanation:

    4. Government cuts income tax rates on households.

    a. New AD curve:

    b. Explanation:

    5. A war in the Middle East makes oil more scarce and causes firm to raise the prices they
    charge for their goods and services

    a. New AD curve:

    b. Explanation:

    6. A stock market bubble bursts and share prices tumble.

    a. New AD curve:

    b. Explanation:

    7. Unexpectedly high inflation reduces the real interest rate on savings and loans.

    a. New AD curve:

    b. Explanation:

    8. Government, in an effort to balance its budget, reduces spending on infrastructure


    repairs.

    a. New AD curve:

    b. Explanation:

    9. Speculation causes international investors to demand more of the nation’s currency,


    causing it to appreciate against the currencies of trading partners.

    a. New AD curve:

    b. Explanation:

    10. By issuing new bonds to finance its budget deficit, the government is able to spend more
    this year than it collected in taxes.

    a. New AD curve:

    b. Explanation:

    11. Due to the threat of rising unemployment, households begin saving a larger percentage
    of their disposable income.
    a. New AD curve:

    b. Explanation:

    12. Real estate prices are rising at record annual rates.

    a. New AD curve:

    b. Explanation:

    13. Swiss households take a record number of vacations abroad, while tourism to
    Switzerland declines.

    a. New AD curve:

    b. Explanation:

    14. Firm in various industries expect prices of their output to fall in the near future.

    a. New AD curve:

    b. Explanation:

    15. The Swiss government raises the minimum wage in all Swiss cantons.

    a. New AD curve:

    b. Explanation:

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