You are given a choice of taking the simple interest on 100,000 invested for 2 years

1. Determine whether each of the following would cause a shift of the aggregate  demand curve, a shift of the aggregate supply curve, neither, or both.  Which  curve shifts, and in which direction? What happens to aggregate output and the  price level in each case?

a. The price level changes

i. Which  curve shifts?


ii. Which direction does it shift?


iii. What  happens to aggregate output?


iv. What happens to the price  level?


b. Consumer confidence declines

i. Which curve  shifts?


ii. Which direction does it shift?


iii. What  happens to aggregate output?


iv. What happens to the price  level?


c. The supply of resources increases

i. Which curve  shifts?


ii. Which direction does it shift?


iii. What  happens to aggregate output?


iv. What happens to the price  level?


d. The wage rate increases

i. Which curve  shifts?


ii. Which direction does it shift?


iii. What  happens to aggregate output?


iv. What happens to the price  level?



2. Determine whether the following statements are true or  false.
i. Some people who are officially unemployed are not in the labor  force.




ii. Some people in the labor force are not  working.




iii. Everyone who is not unemployed is in the labor  force.




iv. Some people who are not working are not  unemployed.












3. Refer to the  following data on the U.S. consumer price index and answer the questions  below.
Year CPI Year CPI Year CPI Year CPI
1988 118.3 1993 144.5 1998 163.0 2003 184.0
1989 124.0 1994 148.2 1999 166.6   2004 188.9
1990 130.7 1995 152.4 2000 172.2 2005 195.3
1991 136.2 1996 156.9 2001 177.1 2006 201.8
1992 140.3 1997 160.5 2002 179.9

a. Compute  the inflation rate for each year  1989-2006.







b. Which years were years of  inflation?  






c. In which years did deflation occur?  





d. In which years did disinflation occur? 

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