Shifts in Aggregate Demand

Critical Thinking Questions

If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?

If firms become more optimistic about the future of the economy and, at the same time, innovation in 3-D printing makes most workers more productive, what is the combined effect on output, employment, and the price-level?

If Congress cuts taxes at the same time that businesses become more pessimistic about the economy, what is the combined effect on output, the price level, and employment using the AD/AS diagram?