1.Determine whether each of the following would cause a shift of the aggregate demand (AD) curve, a shift of the aggregate supply (AS) curve, neither, or both. Which curve will shift, and in which direction? What will happen to aggregate output and the price level in each case? **Note that the answer needs to contain both short-run and long-run.

a.The price level changes.

i.Which curve will shift?

Both curves will shift.

ii.Which direction does it shift?

Demand will shift upwards while supply will shift downward.

iii.What will happen to aggregate output?

Aggregate output will decrease.

Long run and short run answers are needed.

iv. What will happen to the price level?

The price level will increase.

b.Consumer confidence declines.

i.Which curve will shift?

ii.Which direction does it shift?

iii.What will happen to aggregate output?

iv. What will happen to the price level?

c.The supply of resources increases.

i.Which curve will shift?

ii.Which direction does it shift?

iii.What happens to aggregate output?

iv. What happens to the price level?

d.The wage rate increases.

i.Which will curve shift?

ii.Which direction does it shift?

iii.What will happen to aggregate output?

iv. What will happen to the price level?