part_2_chapter_20[1](2)

part_2_chapter_20[1](2) - TheAggregate Supply(AS)Curves The...

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AGGREGATE DEMAND AND AGGREGATE SUPPLY 21 The Aggregate-Supply ( AS ) Curves The AS curve shows the total quantity of g&s firms ________ and _____ at any given price level. P Y SRAS LRAS AS is: ______-sloping in short run _______ in long run The natural rate of output ( ) is the amount of output the economy produces when unemployment is at its_________. Y N is also called potential output or full-employment output . AGGREGATE DEMAND AND AGGREGATE SUPPLY 23 Why  LRAS Is Vertical Y N determined by the economy’s stocks of________________ ________________, and on the level of_________. An increase in P P Y LRAS P 1 _________ affect any of these, so it _______ affect Y N . (Classical dichotomy) P 2 Y N
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AGGREGATE DEMAND AND AGGREGATE SUPPLY 24 Why the  LRAS Curve Might Shift Any event that changes any of the determinants of Y N will shift LRAS . Example: Immigration increases L , causing Y N to rise. P Y LRAS 1 Y N Changes in L or natural rate of unemployment ______________ Baby-boomers_________ Govt policies ________ natural u-rate Changes in K or H Investment in_____________________, More people_______________ Factories destroyed by_______________ Changes in natural resources Discovery of new ______deposits Reduction in supply of__________________ Changing weather patterns that affect agricultural production Changes in technology _______________improvements from technological progress
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AGGREGATE DEMAND AND AGGREGATE SUPPLY 27 LRAS 1980 Using  AD AS to Depict  LR Growth and  Inflation Over the long run, tech. progress shifts LRAS to_________. P Y AD 1990 LRAS 1990 AD 1980 Y 1990 and growth in the money supply shifts AD to the________. Y 1980 AD 2000 LRAS 2000 Y 2000 P 1980 Result: ongoing ______ and growth in________. P 1990 P 2000 AGGREGATE DEMAND AND AGGREGATE SUPPLY 29 Changes in Demand in the Long-run. If AS is vertical, fluctuations in AD do ____ cause fluctuations in output or employment. P Y AD 1 LRAS AD hi AD lo Y 1 If AD Increases, Prices ____ and output ______. If AD decreases, prices______ and output _______.
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AGGREGATE DEMAND AND AGGREGATE SUPPLY 28 Short Run Aggregate Supply ( SRAS ) The SRAS curve is upward sloping: Over the period of 1-2 years, an increase in P P Y SRAS causes an increase in the _____________ __________.
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part_2_chapter_20[1](2) - TheAggregate Supply(AS)Curves The...

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