1. The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. With the use of graphs of the Aggregate demand (AD)/Aggregate supply (AS) model, explain (a) recessionary gap (b) inflationary gap.

4. Explain how changes in the stock of capital affect aggregate supply.

5. Use graphs to explain the differences between demand pull inflation and cost-push inflation.