Chapter_33 - Chapter 33Chapter 20 Aggregate Demand and...

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Unformatted text preview: Chapter 33Chapter 20 Aggregate Demand and Aggregate Supply WHATS NEW IN THE THIRD EDITION: There is a new In the News box on "The Trash Indicator" and a new Case Study on "The 2001 Recession." The Case Study on "Oil and the Economy" has been updated. A new FYI box on "The Origins of Aggregate Demand and Aggregate Supply" has also been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand: three key facts about short-run economic fluctuations. how the economy in the short run differs from the economy in the long run. how to use the model of aggregate demand and aggregate supply to explain economic fluctuations. how shifts in either aggregate demand or aggregate supply can cause booms and recessions. CONTEXT AND PURPOSE: To this point, our study of macroeconomic theory has concentrated on the behavior of the economy in the long run. Chapters 20 through 22 now focus on short-run fluctuations in the economy around its long-term trend. Chapter 20 introduces aggregate demand and aggregate supply and shows how shifts in these curves can cause recessions. Chapter 21 focuses on how policymakers use the tools of monetary and fiscal policy to influence aggregate demand. Chapter 22 addresses the relationship between inflation and unemployment. The purpose of Chapter 20 is to develop the model economists use to analyze the economys short-run fluctuationsthe model of aggregate demand and aggregate supply. Students will learn about some of the sources for shifts in the aggregate-demand curve and the aggregate-supply curve and how these shifts can cause recessions. This chapter also introduces actions policymakers might undertake to offset recessions. 1 2 Chapter 33/Aggregate Demand and Aggregate Supply Chapter 33/Aggregate Demand and Aggregate Supply 3 KEY POINTS: 1. All societies experience short-run economic fluctuations around long-run trends. These fluctuations are irregular and largely unpredictable. When recessions do occur, real GDP and other measures of income, spending, and production fall, and unemployment rises. 2. Economists analyze short-run economic fluctuations using the model of aggregate demand and aggregate supply. According to this model, the output of goods and services and the overall level of prices adjust to balance aggregate demand and aggregate supply....
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This note was uploaded on 03/07/2010 for the course FMT 0438310384 taught by Professor Hung during the Spring '10 term at Aarhus Universitet, Aarhus.

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Chapter_33 - Chapter 33Chapter 20 Aggregate Demand and...

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