Ch.8 Discussion: the Bus Cycle

1. LRAS stands for:

2. Why does this curve have no slope? What is the message of this curve being straight vertical

3. Any equilibrium beyond (to the right of) LRAS does what to the unemployment rate?

4. Why?

5. Any equilibrium beyond (to the right of) LRAS does what to the inflation rate?

6. Why?

7. Scientists discuss new sources of clean energy. A big discovery in this field would shift LRAS in which direction?

8. Scientist also discuss deisease outbreaks. Such an outbreak would shift LRAS in which direction?

9. Aggregate supply slopes from the _ corner of the graph upward toward the _ corner meaning a greater output of GDP requires prices to _.

10.Teachers are tenured (which means a teacher must be brought to court to be fired). If every worker in America were tenured after a year on the job (as was the case in Portugal) then aggregate supply would shift _

11.My credit card company often offers me checking accounts and my bank often offers me investments. Such are examples of deregulation. Deregulation shifts the aggregate supply curve?

12.Aggregate demand slopes from northwest down to the southeast as does a regular demand curve. A regular demand curve has this negative slope because of the substitution effect meaning that discounted items replace others. However why can't the substitution effect be used to justify aggregate demand?

13.Regular demand also slopes down because of the income effect, which means a discount is the same as a pay raise. If prices decline in a country, is that not the same as a national pay raise?

Ch.9 Discussion: Aggregate Demand

1. How would you explain autonomous consumption to someone outside of economics?

2. Autonomous consumption is autonomous from _?

3. Does your income in a year affect your autonomous consumption during that same year?

4. Describe something that affects auto cons?

5.Name an organization interested in estimating autonomous consumption (and why)that no other student has mentioned. (example:Mass Dept.of Welfare,how much do indigent families really need)

6. What does the 45' line represent?

7. For any example is MPC or APC steeper?

8. As income increases, APC rises, falls or remains constant?

9. As income increases, MPC rises, falls or remains constant?

10. As income increases, does consumption or savings rise faster,EXPLAIN WHY?(choosing one gets you no points, points are earned only with explanations about %v.$change)

11. Name an item that you have dropped from your own autonomous consumption- such as a land line telephone! (your answer must be unique)

(ECO-103-V03) ANSWER QUESTIONS NO EXPLAINATION NEEDED.

THANKYOU.