1. Use the AS/AD model to determine how each of these events will affect the economy.

First determine if the economy is initially to the "LEFT", "ON", or to the "RIGHT" of the LARS. Then determine which curve (S) is (are) shifting and in which direction (left or right).

Example: Initial situation: inflationary GAP; event: government increase taxes

LEFT; AD shifts left (please have a line per item and avoid any explanations)

A- Initial situation: unemployment rate is 10%; event: consumer confidence drops

B- Initial situation: a positive GDP GAP; event: the FED increases interests rates.

C- initial situation: Unemployment rate is at 4%; event: consumer confidence deteriorates.

D- initial situation: underutilization of resources; events: Congress passes an infrastructure bill increasing government spending on infrastructure.

E- initial situation: Inflationary gap; event: government increases spending.

F- initial situation: cyclical unemployment is 2%; event: interest rates decline

G- initial situation: full employment; event: investments increase.

H- initial situation: negative GDP GAP; event: productivity increases

I- initial situation: economy is on the PPF; event: unexpected "bad" weather (like a natural disaster or drought)

J- initial situation: a recession; event: wages (a cost of production) increases