LECTURE%20NOTES%2011 - University of Modern Sciences & Arts...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Modern Sciences & Arts (MSA) Aggregate demand and aggregate supply/exercise Dr. Heba Helmy ECO-101 Lecture notes 11 SHIFTS IN THE AGGREGATE DEMAND AND AGGREGATE SUPPLY CURVES SHIFTS IN THE AGGREGATE DEMAND (AD) CURVE AN INCREASE IN AGGREGATE DEMAND LEADS TO A RIGHTWARD SHIFT IN THE AD CURVE RESULTS IN: - EQ.PRICE LEVEL RISES - EQ. QUANTITY (REAL GDP) MAY BE CAUSED BY: - INCREASE IN G (FISCAL POLICY OR WAR OR OTHERS) - RISE IN C - RISE IN I - FALL IN TAXES (FISCAL POLICY) WHEN T FALLS, C RISES, I RISES - INCREASE IN MONEY SUPPLY MONETARY POLICY) WHEN M2 RISES, i FALLS, I RISES IF EQ. OUTPUT RISES ABOVE POTENTIAL OUTPUT, INFLATION TAKES PLACE .( e.g. DURING VIETNAM WAR) A DECREASE IN AGGREGATE DEMAND LEADS TO A LEFTWARD SHIFT IN THE AD CURVE RESULTS IN: - EQ. PRICE LEVEL FALLS - EQ. QUANTITY (REAL GDP) FALLS MAY BE CAUSED BY: - FALL IN G (FISCAL POLICY) - FALL IN C (FALL IN ASSET VALUE) - FALL IN I - RISE IN TAXES ( FISCAL POLICY) WHEN T RISES, C FALLS, I FALLS - DECREASE IN M2 (MONETARY
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This document was uploaded on 06/22/2008.

Page1 / 3

LECTURE%20NOTES%2011 - University of Modern Sciences & Arts...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online