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Our Discussion Assignment for this week looks at the Aggregate Demand and Aggregate Supply Curve and applies the model to the business cycle.

According to Chapter 10 of our text, the four nonprice-level determinants of aggregate demand (shifters of the AD curve) are:

Consumption (C)

Investment (I)

Government spending (G)

and Net exports (X M)

and the five nonprice-level determinants of aggregate supply (shifters of the AS curve) are:

Resource prices (domestic and imported)

Technological change

Taxes

Subsidies

Regulations

In the American Economy, the roller coaster known as the business cycle is a never ending phenomenon. The recurring expansions and contractions of our economy are measured by changes in real gross domestic product, the unemployment rate and the inflation rate.

A complete cycle typically lasts from five to nine years, but could extend to ten years or more and shorten to four years. It is divided into four phases -- expansion, peak, contraction, and trough. Unemployment inevitably rises during contractions and inflation tends to elevate during expansions and worsen during the peak. To avoid the inflation and unemployment problems of business cycles, the federal government frequently undertakes various fiscal and monetary policies (which we will study later in this course).

For this week you will need to do a little internet research and find us an example in history of when either Aggregate Demand or Aggregate Supply changed resulting in an extreme of the business cycle with a high level of unemployment or high rate of inflation.

You can select any time period and any country.

Specifically for this discussion you will need to identify:

1. Which curve shifted (Ad or AS)?

2. Which non-price determinant caused that shifting?

3. How did that event affect the average citizen?

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