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1.       Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?

2.       What is a consumption function? Describe the graph of a consumption function and explain its shape. If total spending is consumption plus investment spending, how does an increase in the interest rate affect total spending?


3.       Explain what would cause the government purchases function to increase. Will a change in social security spending affect government purchases?


4.        How is an aggregate demand curve derived? What would cause the aggregate demand curve to shift to the right?


5.       For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).


a. Households decide to save a smaller share of their disposable income.

b. There is an 8-week strike in the steel industry.

c. A drought in the Midwest causes poor wheat harvest.

d. The labor force participation rate increases.


Your response should be at least 75 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.


















APA Guidelines

CSU requires that students use the APA style for papers and projects. Therefore, the APA rules for formatting, quoting, paraphrasing, citing, and listing of sources are to be followed. A document titled “APA Guidelines Summary” is available for you to download from the APA Guide Link, found in the Learning Resources area of the myCSU Student Portal. It may also be accessed from the Student Resources link on the Course Menu. This document provides links to several internet sites that provide comprehensive information on APA formatting, including examples and sample papers.

Submitting Case Studies

Once you have completed your Case Study, submit it by uploading through the “view/complete” link under the Assignment tab in Units II, IV, VI, and VIII. Do not e-mail your paper directly to your professor. By using the Assignment tab, your university record will automatically be updated to indicate you have submitted your Case Study and the assignment will be provided to your professor for grading.


 Course Textbook

McEachern, W. A. (2012). ECON Macro 3 (3rd ed.). Mason, OH: South-West





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