Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. LO1, LO2

a. A reduction in the economy’s real interest rate.

b. A major increase in Federal spending for health care (with no increase in taxes).

c. The complete disintegration of OPEC, causing oil prices to fall by one-half.

d. A 10 percent reduction in personal income tax rates (with no change in government spending).

e. A sizable increase in labor productivity (with no change in nominal wages).

f. A 12 percent increase in nominal wages

(with no change in productivity).

g. A sizable depreciation in the international value of the dollar