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Unformatted text preview: Macroeconomics – Class Notes – 11/7/07 CHAPTER 20: AGGREGATE DEMAND and SUPPLY Factors the shift AD Curve (LEFT) • Consumers become pessimistic • Businesses become pessimistic • Foreigners revolt against U.S goods • Congress decreases government purchases • The Fed sold Government securities • Investment accounts for almost (2/3) of the drop in Real GDP in a recession Long-Run Aggregate Supply (A.S) Curve • Long-Run Aggregate Supply Curve (LRAS) is vertical at full-employment GDP • LRAS depends on: o Resource Base o Technology o Natural Rate of Unemployment • Assume that LRAS curve is fixed • When the expected rate of inflation = Actual Inflation, economy is on Long-Run Aggregate Supply curve. • Output level is what economy produces when unemployment is at the natural rate (of unemployment) Shifts in Long-Run Aggregate Supply Curve • Over time, these shift Long-Run Aggregate Supply right: o Greater Resource Base o Better Technology o Lower Natural Rate of Unemployment Short-Run Aggregate Supply Curve Slopes Upward...
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This note was uploaded on 04/15/2008 for the course ECON 101 taught by Professor Golden during the Fall '07 term at Allegheny.
- Fall '07