Homework 8 (Due Thursday, February 22nd in class)

Directions: Determine the effect on the short-run aggregate demand (AD) curve for each of the following scenarios and sketch a graph to illustrate each answer.

1.  A decrease in consumer wealth is due to a plunge in stock prices. 

2.  Households and businesses are increasingly optimistic about future economic performance. 

3.  Businesses increase investment spending. 

4.  The government cuts taxes for households and businesses.

5.  The Fed decreases the money supply.