Chapter 6

• 1.Show how to derive the AD curve from the IS-LM curves.Use this picture to show what happens to the AD when there is a tax increase.
• 2.What is meant by the "neutrality of money"?
• a.Under which AS curve is money neutral?
• b.Under which AS curve is money definitely not neutral?
• c.Using IS-LM-AD-AS curves, illustrate the case of money neutrality.
• 3.What is meant by 100% crowding out of fiscal policy?
• a.Under what AS curve is there 100% crowding out?
• b.Under which AS curve is there the LEAST amount of crowding out?
• c.Using IS-LM-AD-AS curves, illustrate the case of 100% crowding out.
• 4.What is meant by the velocity of money?Using FRED, obtain a graph of the velocity of money (M1).What has happened to velocity since the Great Recession?

Chapter 7

• 1.What are the two basic building blocks that provide the underlying foundation for the AS curve?
• 2.Show how to derive the modern AS curve from its underlying foundations.What assumptions are you making in your description of the labor market?Are these realistic, why or why not?
• 3.Explain why an increase in money wages shifts the modern AS curve to the left.
• 4.Show how to derive the classical AS curve from its underlying foundations.What assumptions are you making in your description of the labor market?Are these realistic, why or why not?
• 5.What would make the classical AS curve shift to the right?To the left?