Lecture+15 - Economics 102 Lecture 15: Economic...

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1 Economics 102 Lecture 15 : Economic Fluctuations LECTURE 15 ECONOMIC FLUCTUATIONS 1 Economic Fluctuations § In 1982 the U.S. economy was in recession. The unemployment rate rose to over 10%, the highest rate since the Great Depression. § What cause the economy to enter recession? § How did the economy recover? LECTURE 15 ECONOMIC FLUCTUATIONS 2 In this lecture, look for the answers to this question: § How does the model of aggregate demand and aggregate supply explain economic fluctuations?
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2 LECTURE 15 ECONOMIC FLUCTUATIONS 3 Macroeconomic Equilibrium § Short-Run Macroeconomic Equilibrium AD curve shows quantity of real GDP demanded at each P . SRAS curve shows quantity of real GDP supplied at each P . Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the SRAS curve. LECTURE 15 ECONOMIC FLUCTUATIONS 4 A Short-Run Equilibrium Short-run equilibrium: P = P 1 , Y = Y 1 § If Y is below equilibrium, § If Y is above equilibrium, P Y AD SRAS P 1 Y 1 LECTURE 15 ECONOMIC FLUCTUATIONS 5 A Short-Run Equilibrium § These changes bring a movement along the SRAS curve toward equilibrium. § In a short-run equilibrium, Y can be greater than or less than Y N . P Y AD SRAS P 1 Y 1
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3 LECTURE 15 ECONOMIC FLUCTUATIONS 6 Macroeconomic Equilibrium § Long-Run Macroeconomic Equilibrium Long-run macroeconomic equilibrium occurs when real GDP, Y , equals natural real GDP, Y N —when the economy is on its
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This note was uploaded on 04/02/2008 for the course ECON 102 taught by Professor Rossana during the Fall '08 term at University of Michigan.

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Lecture+15 - Economics 102 Lecture 15: Economic...

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