Using Aggregate Supply and Aggregate Demand Curves, Indicate What Impact

question 36

Essay

Using aggregate supply and aggregate demand curves, indicate what impact each of the following would have on the price level and on the equilibrium level of aggregate output in the short run.
(a) The Fed buys bonds in the open market.
(b) The economy is far below capacity and the government increases government spending.
(c) The floods in the Midwest in 1993 destroyed a large portion of the United States' agricultural crops.

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Definitions:

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Gross Margin Percentage

A financial metric that represents the portion of sales revenue that exceeds the cost of goods sold, expressed as a percentage.

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from total revenue.