For this discussion, imagine that one of the scenarios listed below were to occu

Question

For this discussion, imagine that one of the scenarios listed below were to occur:

1. Foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.

2. The average U. S. worker has a large increase in productivity.

3. Federal personal income tax rates are reduced by an average of ten percent.

For your initial post, discuss what impact you think one of these changes in the United States would have on aggregate demand, short-run aggregate supply, and real GDP.

Explanation / Answer

1.

When foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes, demand for US goods (exports) would increase. This will shift the AD curve for US to the right, keeping supply constant. As a result, prices of US goods as well as market sales of the good will increase.

2.  

When the average U. S. worker has a large increase in productivity, aggregate supply of US goods will increase, as more output will be produced using the same resources. As a result, AS curve for US will shift to the right, keeping demand constant. As a result, prices will fall and sales of the good will increase.

3. Federal personal income tax rates are reduced by an average of ten percent.

A fall in the income taxes will leave consumers with higher disposable incomes. As a result, demand for goods and services by them will increase. This will shift the AD curve for US to the right, keeping supply constant. As a result, prices of US goods as well as market sales of the good will increase.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.