1. State whether each of the following transactions is a part of aggregate demand in the United States, and if so whether it is C, I, G, X, or IM.

a)David buys a keyboard synthesizer made in the United States.

b)A Japanese automaker buys stock in an American auto company.

c)A Japanese automaker builds an assembly plant in Illinois.

d)Will buys a compact disc player made in Japan.

e)Dieter, a German resident, buys frozen chickens that were raised in the United States.

f)The U.S. government sends an insurance check to Renee, an unemployed keypunch operator.

g)Mark buys a three-year-old used car.

h)The state government sends a salary check to Karen, an economics instructor at Rigorous State College.

2.Will these events lead to movements along the consumption function (up or down), to shifts in the consumption function, or to no change?

a)A gradual recession leads to a decline in disposable incomes.

b)Fear of a future recession leads people to save more.

c)Rising prices reduce the real value of people's money.

d)An advertising campaign leads people to switch purchases from apple juice to orange juice.

e)As the economy climbs out of a recession, employment increases.

f)Over time, people slowly build up their assets.

3.Answer this question using the circular flow diagram, Figure 1 in the text. The following amounts are known:

National income:9,000

Taxes:2,500

Transfers:500

Consumption:6,500

Investment:800

Government spending:2,100

Imports:900

Find a) disposable income, b) savings, c) domestic product.