gy our handwritten answers and attaching them in one folder. Question 1 Explain whether each of the following will cause a shift of the aggregate demand (AD) curve or a movement along the aggregate demand (AD) curve a. Firms become more optimistic and increase their spending on machinery and equipment b. The government increases income taxes in an attempt to reduce a budget deficit c. The economy experiences 4 percent inflation d. Faster income growth in other countries Question 2 Explain how each of the following events would affect the short- run aggregate supply (SRAS) curve a. An increase in the labor force b. An unexpected increase in the price of an important raw material c. Decrease in the wages rates d. Positive supply shock Question 3 Explain the effects of the following