Economics Micro & Macro (CliffsAP)

Free Response Section

1. The economy is underachieving at an unemployment level of 9 percent and the government has a balanced
   budget.
   a. Draw a correctly labeled aggregate supply and aggregate demand graph to illustrate how government spending
   will affect the following:
   i. Price level
   ii. Aggregate demand
   iii. Real output

b. Draw a correctly labeled aggregate supply and aggregate demand graph to illustrate and explain how a decrease

in business taxes will influence each of the following:

i. Aggregate supply

ii. Price level

Part II: Macroeconomics