chapter15notes

chapter15notes - Chapter 15 Aggregate Demand Curve- showing...

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Chapter 15 h Aggregate Demand Curve - showing relationship between short-run equilibrium output (Y) and inflation h o Inflation goes up then output goes down (movement along AD curve) h Inflation, Fed and AD curve: o Inflation , real interest rate , autonomous expenditure , output h Reasons for down slope of AD o When inflation high, value of dollar less, so wealth less so output less o Poor don’t spend as much as wealthy o When inflation high, uncertain of future prices so spend less now o When domestic inflation does up, domestic prices go up, so other countries don’t want to buy as much from us h Shifts in AD o Exogenous changes in spending (ie tech, fiscal policy) o If interest rate goes up, AD goes left; if interest rate does down, AD goes right h Shifts vs Movement in AD o Shift- change in monetary policy, interest rate or exogenous changes o Movement- no change in monetary policy; inflation change h Inflation inertia o Inflation is slow to change o b/c depends on people expectations of future based on recent/past
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This note was uploaded on 04/16/2008 for the course ECON 100 taught by Professor Kasilwal during the Fall '07 term at CSU Long Beach.

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chapter15notes - Chapter 15 Aggregate Demand Curve- showing...

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