1. What is meant by the term "sticky prices"? Can you give a real-world example? 2. As it relates to the aggregate demand curve... a. Name 3 reasons why it has a negative slope. b. List 4 things that can shift the AD curve. 3. As it relates to the multiplier effect... a. What does this term mean? b. Explain the components of the consumption function c. If the marginal propensity to consume for households is 0.6, calculate the multiplier and calculate the total increase in output that results from an increase in government spending of $10 million. 4. Using graphs, explain the difference between the short run and long run aggregate supply curves. 5. As it relates to the relationship between the short run and the long run... a. Graphically show an economy operating with greater than full employment and show the effects that happen in the long run. b. Graphically show an economy operating with less than full employment and show the effects that happen in the long run

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1. As it relates to aggregate demand and short-term aggregate supply... a. Graphically show how the government can engage in expansionary fiscal policy when current GDP is less than potential GDP. What is one potential policy action they could take? b. Graphically show how the government can engage in expansionary fiscal policy when current GDP is greater than potential GDP. What is one potential policy action they could take? 2. As it relates to the federal budget a. Give some examples of mandatory spending. b. Give some examples of discretionary spending c. What happens when spending is greater than tax revenue? 3. According to basic economic theory, tax cuts increase aggregate demand and ultimate increase GDP.