Problem 1) Explain and show graphically how each of the following changes would affect the shape of the AD curve:
1) Taxes are reduced
2) Nominal money supply increases
3) The Government uses an expansionary fiscal policy
4) Entrepreneurs become more bullish
5) Foreigners develop a strong preference for domestically produced goods
6) Autonomous component of Consumption increases.
Problem 2) Explain and show graphically how each of the following changes would affect the shape of the AS curve:
1) Taxes on profit are reduced
2) Competition is enhanced by introducing some anti-trust laws
3) Trade unions are less powerful
4) Workers are better trained and more flexible.
5) An oil shock hits the system
6) Capital become more productive
Problem 3) consider a country A with a population of 220 people; 200 are working age and 180 are in the labour force. 30 people are without a job and 30 have a part time job. By using ILO definitions, compute the following:
1) The unemployment rate in country A
2) The employment ratio in country A
3) The participation rate in country A