EC2013S11_L7

EC2013S11_L7 - ECON2013 Principles of Macro Lecture 7...

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ECON2013 – Principles of Macro Lecture 7 Demand and Supply Equilibrium
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Today we talk about… 1. Adding the Aggregate Supply 2. Multiplier Revisited 3. Gaps Revisited
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Adding the A.S. Curve
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The Aggregate Supply Curve • Aggregate supply curve is upward Sloping • Higher opportunity costs require also higher output prices • Higher opportunity costs come from limited resources and costs of inputs
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AS and Profits • There is a second way to explain the upward slope of the AS Businesses seek higher profits and higher prices mean also higher profits Unit profit = Price – Unit cost
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An aggregate supply curve Figure Real GDP Price Level
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A shift of the aggregate supply curve Figure 2 0 Real GDP (Y) Price Level (P) 6,000 5,500 S 0 (lower wages) S 0 S 1 (higher wages) S 1 100 A B
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Factors Shifting the AS 1. Nominal wage rate increase Higher production costs Aggregate supply curve shifts inward/left 2. Prices of other inputs increase Higher production costs Aggregate supply curve shifts inward/left
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Factors Shifting the AS 3. Technology & productivity improve
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This note was uploaded on 04/08/2011 for the course ECON 2003 taught by Professor Staff during the Spring '11 term at Arkansas.

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EC2013S11_L7 - ECON2013 Principles of Macro Lecture 7...

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