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# handout8 - Elements of Macroeconomics Handout#8 1 Aggregate...

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Unformatted text preview: Elements of Macroeconomics Handout #8 1. Aggregate Demand Curve AD: Y; =D(P,E,},AO) =D( 5 ,E,F,AO) Determines _ the SIOpe Determines the of AD Position of AD 2. Slope of Aggregate Demand Curve 5 . Diagram: AD is negatively-sloped I i - Intuition: JrP ::> if; :3 TC ::> TE :> TYd * 3. Shifts in AD Curve '. Diagram: T5, T7, or TAO shifts ADto the right, and Vice-versa - Intuition; T5, T7, or TAO :> TE :> TYd 4. Graph: Aggregate Demand Curve P 5. Aggregate Supply Curve AS: YS =S(P,VI{,,ZO,TE0,K0) = S( P ,W;,ZO,TE0,KO) L5,; Determines V. Determines the Slope OfAS Position of AS 6. Slope of Aggregate Supply Curve - Diagram: AS is positively—sloped . Intuition: TP 3 TProﬁtS :> TYS 7. Shifts in AS Curve . Diagram: xLWO, l/Zo, TTED or TKO shifts AS to the right, and Vice-versa . Intuition: \LWO, \LZO, TTEO or TKO :> TProﬁts ::> TYS 8. Graph: Aggregate Supply Curve P 9. Equilibrium Condition - State of Balance between Demand for Output & the Supply of Output 10. Model Yd =D<P,E,?,A0> YS =S(P,W0,ZO,TE0,K0) Yd=Y S 11. Graph: Market Equilibrium = Equilibrium Y & P* = Equilibrium P 12. Disequilibrium--Surp|uses P SUJFFKWS A5 13. Disequilibrium- -Shortages AS 14. Shocks - Aggregate Demand Shocks —Changes in variables that determine the position of AD - Aggregate Supply Shocks ——Changes in variables that determine the position of AS 15. Aggregate Demand Shocks - Positive Aggregate Demand Shocks: Changes in Variables that shift AD to the right. Examples: l5, T7» or TAO - Negative Aggregate Demand Shocks: Changes in Variables that shift AD to the left. Examples: ¢Ca \$7: or M 16. Positive Aggregate Demand Shock ? 17. Negative Aggregate Demand Shock ”F 18. An Example: T7 ...
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handout8 - Elements of Macroeconomics Handout#8 1 Aggregate...

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