2-3-2011 - 2/3/2011 The Three Market Model We introduce our...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
2/3/2011 1 The Three Market Model We introduce our macroeconomic model, with a goods market, a money market, and an exchange market. Lecture 8, Tuesday, February 8 Measurement Real GDP The price level and inflation The unemployment rate The real interest rate Exchange rates/the value of the dollar PRICE SUPPLY DEMAND Equilibrium Price Equilibrium Quantity PRICE INDEX REAL GDP AGGREGATE SUPPLY AGGREGATE DEMAND The Goods Market PRICE INDEX REAL GDP AGGREGATE SUPPLY AGGREGATE DEMAND The Goods Market: increase in aggregate demand Expansion Inflation PRICE INDEX REAL GDP AGGREGATE SUPPLY AGGREGATE DEMAND The Goods Market: decrease in aggregate demand Recession Deflation P Q PRICE INDEX REAL GDP AGGREGATE SUPPLY AGGREGATE DEMAND The Goods Market: decrease in aggregate supply Recession Inflation
Background image of page 1

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

View Full DocumentRight Arrow Icon
2/3/2011 2 Aggregate Demand Aggregate Demand: SPENDING By households for consumption By businesses for investment By governments for government purchases By the World for exports By Americans for imports AD = Spending = C + I + G + X - M Aggregate Supply Aggregate Supply: PRODUCTION By Businesses Which buy inputs Use technology Under natural conditions To produce output on which consumers, other businesses, government and the world want to spend AS = Production P Q PRICE INDEX REAL GDP AGGREGATE SUPPLY AGGREGATE DEMAND The Goods Market Production Spending Equals Percent Change, Real Consumption Spending Consumption spending is up! Savings Rate (Percent of Income) The Goods Market: Households increase consumption Aggregate Demand C I G X M Aggregate Supply Input costs (labor, machinery, materials) Technology Natural conditions P Q AS AD Expansion Inflation Consumption
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

2-3-2011 - 2/3/2011 The Three Market Model We introduce our...

This preview shows document pages 1 - 3. Sign up to view the full document.

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