Download AD AS questions - Doral Academy Preparatory

I. Graph the economy moving from full employment to a recessionary gap, inflationary gap, and stagflation in
the areas below.
Recessionary Gap
Inflationary Gap
Stagflation
I. In each of the following cases, explain whether AD or AS would shift and in which direction. Assume that
the economy initially begins at full employment equilibrium. Then label the situation as a recessionary gap,
inflationary gap, or stagflation or no problem. Finally, explain what would happen to RGDP, price levels, and
unemployment.
AD or AS
Macro situation
PLevel RGDP Unemp.
1. Consumer confidence rises once economic
indicators are released for the 4th quarter of
2003.
2. The US decreases exports of Beef due to
the Mad Cow disease discovery
3. Many state governments decreases spending
on secondary education due to budget
problems
4. The stock market rises quickly
5. Oil prices rise due to US involvement in
Iraq
6. New productive knowledge makes factories more
productive in a number of industries
II. On the back of this worksheet, graph the adjustment process (from the macroeconomic problem in the above
3 graphs back to full employment equilibrium) if no government intervention occurs.