Assignment Two– Upper Six - Economics Unit Two
June 2006
#2 (a) Explain the meaning of the following terms:
(i)
(ii)
(iii)
(iv)
(v)
(b)
Aggregate demand
Aggregate demand curve
Aggregate supply
Aggregate supply curve
Equilibrium price level
[15 marks]
Using aggregate demand and aggregate supply curves to illustrate your points, discuss
the impacts of the following events on the price level (P) and equilibrium GDP (Y) in the
short run:
(i)
A tax cut holding government purchases constant, with the economy operating
at near full capacity.
(ii)
An increase in the money supply during a period of high unemployment and
excess industrial capacity.
(iii)
An increase in the price of oil caused by war in the Middle East, assuming that
the government attempts to keep interest rates constant by accommodating
inflation.
[27 marks]
June 2008
#2
(a) According to the classical model, when the economy is in equilibrium some amount
of unemployment still exists.
(i)
(ii)
(iii)
State the level of unemployment referred to in the statement above.
[3 marks]
Draw a graph showing equilibrium unemployment. (page 349)
[5 marks]
On the same graph show disequilibrium unemployment. (page 350)
[3 marks]
(b) Explain why disequilibrium employment exists according to the classical model.
[5 marks]
(c) Explain how, according to the classical view, the economy goes back to equilibrium
employment from a position of disequilibrium.
[5 marks].
June 2007
#2
(a)
Explain FOUR major determinants of aggregate demand.
[8 marks]
(b)
Explain FOUR major determinants of aggregate supply.
[8 marks]