Principles of Economics- Mankiw (5th) 688

Principles of Economics- Mankiw (5th) 688 - 712 PA R T T W...

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712 PART TWELVE SHORT-RUN ECONOMIC FLUCTUATIONS QUICK QUIZ: Explain the three reasons why the aggregate-demand curve slopes downward. ± Give an example of an event that would shift the aggregate-demand curve. Which way would this event shift the curve? THE AGGREGATE-SUPPLY CURVE The aggregate-supply curve tells us the total quantity of goods and services that firms produce and sell at any given price level. Unlike the aggregate-demand curve, which is always downward sloping, the aggregate-supply curve shows a relationship that depends crucially on the time horizon being examined. In the long run, the aggregate-supply curve is vertical, whereas in the short run, the aggregate-supply curve is upward sloping. To understand short-run economic fluctuations, and how the short-run behavior of the economy deviates from its long-run behavior, we need to examine both the long-run aggregate-supply curve and the short-run aggregate-supply curve. WHY THE AGGREGATE-SUPPLY CURVE
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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