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Econ 1110, Spring 2008, Professor Te
1
Lecture #15
Aggregate Demand and
Aggregate Supply
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2
Aggregate Demand (
AD
) Curve
•
IS

LM
Intersection for Given Price Level
P
•
Negative Slope
•
P
increases
•
M
/
P
decreases
(LM curve shifts left)
•
excess demand for money/excess supply of bonds
•
sell bonds
•
bond price falls, interest rate increases
•
C
and
I
fall
•
Factors That Shift the
AD
curve
•
Anything that shifts
IS

LM
intersection for a given
price level
P
Econ 1110, Spring 2008, Professor Te
3
LM
2
(
P
=
P
2
>
P
1
)
F
LM
1
(
P
=
P
1
)
E
IS
F
E
AD
P
1
P
2
r
P
Y
Y
Y
2
Y
1
•
P
increases
•
M
/
P
decreases
•
LM
curve shifts left
•
Y
decreases
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4
Aggregate Supply Curve
•
Short Run
•
SRAS
is horizontal
•
Long Run
•
LRAS
is vertical at
Y
Y
=
Econ 1110, Spring 2008, Professor Te
5
Price
Level,
P
P
1
P
2
D
AD
SRAS
1
SRAS
2
LRAS
E
General Equilibrium in
AD

AS
Model
Output,
Y
Y
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This note was uploaded on 04/15/2008 for the course ECON 1110 taught by Professor Tedlochtemzelides during the Spring '08 term at Pittsburgh.
 Spring '08
 TedLochTemzelides
 Macroeconomics

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