What is the impact of cutting taxes on businesses on aggregate supply?
It increases aggregate supply by reducing production costs and incentivizing investment.
What is the impact of deregulation on economic growth?
It can stimulate economic growth by reducing barriers to entry and fostering competition.
What is the impact of increased government spending on infrastructure on AD?
It increases aggregate demand by injecting money into the economy and boosting spending.
What is the impact of increased government spending on education on long-term productivity?
It leads to a more skilled workforce and increased long-term productivity.
Evaluate the effectiveness of supply-side policies in addressing a recession.
Supply-side policies may take longer to impact the economy than demand-side policies, but they can lead to sustainable long-term growth without causing high inflation.
Evaluate the potential drawbacks of supply-side policies.
They may exacerbate income inequality and require significant time to produce noticeable effects.
What is the impact of increased government spending on unemployment benefits on economic growth?
It can reduce the incentive to work, potentially decreasing labor supply and hindering economic growth.
What is the impact of increasing the minimum wage on employment?
It may lead to job losses, particularly among low-skilled workers, as businesses reduce employment to offset higher labor costs.
What is the impact of implementing price ceilings on market efficiency?
Price ceilings can lead to shortages, black markets, and reduced market efficiency as they distort the natural forces of supply and demand.
What is the impact of increasing the money supply on inflation?
Increasing the money supply can lead to inflation if it grows faster than the economy's output, as there is more money chasing the same amount of goods and services.
What is the impact of policies that promote innovation on long-term economic growth?
Policies that promote innovation encourage the development of new technologies and processes, leading to increased productivity, higher living standards, and long-term economic growth.
How does increased government spending on education affect long-run economic growth?
It improves the quality of labor, leading to higher productivity and increased output, shifting LRAS to the right.
How does government investment in infrastructure contribute to long-run real GDP growth?
It boosts overall spending, reduces transportation costs, and improves business efficiency, leading to increased productivity and output.
How do patents promote innovation and long-run economic growth?
Patents protect intellectual property, giving companies more incentive to innovate and create, thus increasing real GDP in the long run.
How does increasing employment lead to higher productivity and economic growth?
More workers contribute to increased output, leading to higher overall production and economic growth.
How do lower taxes for businesses affect the supply of loanable funds?
Lower taxes mean businesses have more money to invest, increasing the supply of loanable funds.
How do lower interest rates impact investment?
Lower interest rates make borrowing cheaper, leading to more investment by businesses and individuals.
How does an investment tax credit encourage economic growth?
It reduces a firm's taxes if it invests, encouraging more investment and growth.
How do lower taxes affect household spending and firm profits?
Lower taxes mean more income for households, leading to more spending and increased profits for firms.
How do productivity incentives boost demand?
Lower taxes incentivize people to work harder, leading to increased employment and less government dependence.
How does lower taxes affect risk-taking and investment?
With lower taxes, the expected income from investing increases, encouraging more risk-taking and investment.
Explain how improvements to roads and bridges can increase economic growth.
Better infrastructure reduces transportation costs for businesses, increases efficiency, and facilitates trade, leading to higher productivity and economic growth.
Explain how government funding for research and development (R&D) can lead to economic growth.
Government funding for R&D encourages innovation and technological advancements, leading to new products, processes, and industries, which boost productivity and economic growth.
Analyze a graph showing a rightward shift of the SRAS curve.
A rightward shift indicates an increase in aggregate supply, potentially due to lower production costs or improved technology, leading to lower price levels and higher output.
Analyze a graph showing a rightward shift of the LRAS curve.
A rightward shift indicates an increase in the economy's potential output, potentially due to increased resources, improved technology, or increased human capital, leading to long-term economic growth.
Analyze a graph showing a rightward shift of the AD curve.
A rightward shift indicates an increase in aggregate demand, potentially due to increased government spending or consumer confidence, leading to higher price levels and higher output.
Explain how a simultaneous rightward shift of both AD and AS curves affects the equilibrium price level and output.
Output will increase. The effect on the price level is indeterminate without knowing the relative magnitudes of the shifts.
Explain how a rightward shift of the AS curve can lead to a decrease in the price level and an increase in real GDP.
An increase in aggregate supply puts downward pressure on prices as firms are able to produce more goods and services at lower costs, leading to higher output and lower inflation.
Explain how an increase in government spending on infrastructure can lead to a rightward shift of the AD curve.
Increased government spending injects more money into the economy, boosting demand for goods and services and shifting the AD curve to the right.
Analyze how a decrease in business taxes can shift the SRAS curve.
A decrease in business taxes reduces production costs, leading to an increase in aggregate supply and a rightward shift of the SRAS curve.
Analyze how an investment tax credit can shift the AS curve.
An investment tax credit encourages businesses to invest more, leading to increased productivity and a rightward shift of the AS curve.
Analyze how an increase in government spending on education can shift the LRAS curve.
Increased investment in education improves the quality of the labor force, leading to higher productivity and a rightward shift of the LRAS curve.
Analyze how a decrease in regulations can shift the AS curve.
A decrease in regulations reduces the costs of doing business, leading to an increase in aggregate supply and a rightward shift of the AS curve.
