21-ad as lr - Long Run Aggregate Demand & Supply...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
macroS2010 Lec21-page 1 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Long Run Lecture 21-PREVIEW Dr. Jennifer P. Wissink ©2009 Jennifer P. Wissink, all rights reserved. April 12, 2010
Background image of page 1

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

View Full DocumentRight Arrow Icon
macroS2010 Lec21-page 2 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ AD and AS Review The aggregate demand (AD) curve is a curve that shows the negative relationship between aggregate output/income and the price level. Recall the new expanded Money Demand Function where M D = f(r, Y, and now the Price Level). The aggregate supply ( AS ) curve is a graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level. Lots of controversy on the logic and determination and shape of this concept.
Background image of page 2
macroS2010 Lec21-page 3 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Shifts in Short-Run AS A cost shock , or supply shock , is a change in costs that shifts the SR-AS curve.
Background image of page 3

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

View Full DocumentRight Arrow Icon
macroS2010 Lec21-page 4 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Shifts in Short-Run AS A cost shock , or supply shock , is a change in costs that shifts the SR-AS curve.
Background image of page 4
macroS2010 Lec21-page 5 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Bad weather, natural disasters, destruction from wars Good weather Public policy waste and inefficiency over-regulation Public policy supply-side policies tax cuts deregulation Stagnation capital deterioration Economic growth more capital more labor techno change Higher costs higher input prices higher wage rates Lower costs lower input prices lower wage rates Shifts to the Left Decreases in Aggregate Supply Shifts to the Right Increases in Aggregate Supply Factors That Shift the SR-AS Curve
Background image of page 5

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

View Full DocumentRight Arrow Icon
macroS2010 Lec21-page 6 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ The Equilibrium Price Level The equilibrium price level is the P where AD=SR-AS. P 0 and Y 0 correspond to equilibrium in the goods market and the money market and a set of price/output decisions on the part of all the firms in the economy.
Background image of page 6
http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Aggregate Demand, Aggregate Supply, Monetary and Fiscal Policy: Short Run Review Expansionary Policy AD shifts out (to the right) Policy works well when the economy is on the flat portion of the SR- AS curve, causing little change in P relative to the output increase. Note: assuming no shift in
Background image of page 7

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

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/24/2010 for the course ECONOMICS 1120 at Cornell University (Engineering School).

Page1 / 22

21-ad as lr - Long Run Aggregate Demand & Supply...

This preview shows document pages 1 - 8. Sign up to view the full document.

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