What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case make a diagram to show the expected effects on the equilibrium price level and the level of real output, assuming that the price level is flexible both upward and downward.

a)A decrease in interest rates at each price level.

b)Worldwide oil prices surge to unprecedented levels. Oil is an important input material for the U.S. industry.

Answers

a)

b)

AS or AD affected?

FOR BOTH A and B tell me the Direction (left/right)

MAKE A Graph - you can make it in Excel or in your notebook

TELL ME IF THE Price (up/down)

TELL ME Output (up/down)