1.1. Demonstrate graphically the effect of an increase in autonomous expenditures when the mpe = .5 and the SAS curve is flat:

a. In the multiplier model.

b. In the AS/AD model.

c. Do the same thing as in a and

b, only this time assume that the SAS curve is upward-sloping.

2. State how the following information changes the slope of the AD curve.

a. The effect of price-level changes on autonomous expenditures is reduced.

b. The size of the multiplier increases.

c. Autonomous expenditures increase by $20.

d. Falls in the price level disrupt financial markets, which offset the normally assumed effects of a change in the price level.