Lecture 3 - 1 1 SR Keynesian Macro Aggregate Demand and...

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Unformatted text preview: 1 1 SR Keynesian Macro Aggregate Demand and Supply The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. In the long-run we are all dead ( depressionunemp / keynes singalong) 2 In the News? 3 Course Issues HW (B, Wiki, ET) Clickers register at iclicker.com Problems? Chat Rooms not emails Introductions, what, hw qs ODE econweb.rutgers.edu/sheflin WIKI Special Needs? Short-Run Supply ONLY 2 4 Output and Prices in SR (Keynesian) Aggregate D&S Versus Micro D&S Agg D=C+I+G+NX C=f(Y-T,Wealth) I=f(i) G exog NX Agg D downward sloping P M/P r I D (p,y) Aggregate S curve Qs=f(P) cet. par. Upward sloping reflects cost, technology, etc P up -> profit up and Qs up Cet. Par. - Particularly wages 5 What Shifts Aggregate Demand Curve? D = C, I, G, NX (=X-M) Anything that changes components C=f(Y-T,W,Expectations) Disposable income Wealth effect stock mkt, housing, real assets I=f(r, expectations) Purchase of physical capital plant &equip animal spirits r up, I down G, NX exogenous for now Fiscal policy G->D T->(Y-T)->C->D Monetary Policy Ms&Md->r->I->D 6 What Factors Shift SR Aggregate Supply? S costs of production Wages raw materials Technology/ Productivity At any Y, different price In the SR only (LR different stories) Focus on Agg D in SR 3 7 Problem talk to neighbor...
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This note was uploaded on 02/15/2010 for the course ECONOMICS 220:103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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Lecture 3 - 1 1 SR Keynesian Macro Aggregate Demand and...

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