Answer Happy

QUESTION 3 A) Explain what the Aggregate Demand (AD) curve is and the relationship between the price level and aggregate output. (4 marks) State the factors that will cause a shift in the AD curve and shift the AS curve. (6 marks) (6 marks) Outline how expansionary policies will impact the factors affecting aggregate demand. Draw the short-run aggregate supply along with the aggregate demand curve and clearly identify the equilibrium point. Illustrate the effects of a contractionary policy on both the price level and the output level both in the short-run. (6 marks) B) C) D) E) With the aid of a diagram, explain the likely impact of expansionary policies when the economy is operating at full capacity on the vertical portion of the AS curve? (8 marks)