Current Economic Analysis
Week 6: Personal Assignment
There are Internet questions with this assignment at the end.
Problems
Problem 1
List three things that would cause a RIGHTWARD SHIFT in the Aggregate Demand curve. List three things that would cause a RIGHTWARD SHIFT in the Aggregate Supply curve.
Problem 2
There has been extensive discussion of the “wealth effect.” The argument goes that inflated stock values were partially responsible for the strong U.S. economy of the 1990’s. Explain this linkage in words and then illustrate with an Aggregate Demand/Aggregate Supply diagram.
Problem 3
Explain the fundamental difference in the “Keynesian” view of the economy versus the “Classical” view.
Problem 4
Suppose the government increases education spending by $20 billion. Based on an MPC of 0.75, how much additional consumption will this increase cause? Show your work.
Problem 5
Would a millionaire and a poor person have the same MPC? Explain thoroughly.
Problem 6
The federal government increases spending by $1 billion to develop a new fighter jet. If the MPC in the economy is 0.1, what will be the overall spending effect on the economy? Show your work.
Internet Questions
Question 1
Visit: http://taxhistory.tax.org
Go explore the Tax History Museum. While there, select the dates 1861 to 1865. Provide a full one-page synopsis on the relative approaches taken by the North and the South with regard to tax policy. Which was superior and why?