Assignment 3
Due on Wednesday, November 18 by 11:45pm. Please read chapters 5&6 and answer the following questions:

1- ) The National Bureau of Economic Research maintains a Web page devoted to business cycle expansions and contractions at http://www.nber.org/cycles.html. Please take a look at this page to see if you can determine how the business cycle has been changing in recent decades. Has the overall length of cycles been changing? Have recessions been getting longer or shorter?

2- ) Please review the Summary of Commentary on Current Economic Conditions by Federal Reserve District (Beige Book), available through the Federal Reserve System at  http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201409.htm Summarize the national economic conditions for the most recent period covered in the report. Overall, is the economy healthy? If not, what problems is it experiencing?

3- ) (Economic Fluctuations) Describe the various components of fluctuations in economy activity over time. Because economic activity fluctuates, how is long-term growth possible?

4- ) (Aggregate Demand and Supply) 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

b. Consumer confidence declines

c. The supply of resources increases

d. The wage rate increases

5- ) One supply-side measure introduced by the Reagan administration was a cut in income tax rates. Use an aggregate demand/aggregate supply diagram to show what effect was intended. What might happen if such a tax cut also shifted the aggregate demand curve?

6- ) How are economic fluctuations linked among national economies?  Could a recession in the United States trigger a recession abroad?
7-) What is the relationship between demand-side economics and the federal budget deficit? Briefly explain.
😎 Why does an aggregate demand curve slope downward? Briefly explain.
9-) Is it possible for the price level fall (deflation) while production and employment both rise? (Hint: Use AD-AS Model)
10-) Why do economists pay attention total employment, price level and growth? Briefly discuss.