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chapter9review - Chapter 9 AD-AS model 9.1 AS curve In the...

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Chapter 9 AD-AS model 9.1 AS curve In the long run Long-run AS curve In the short run Short-run AS curve Shift of short-run AS curve 9.2 AD curve Shape of the AD curve Shift of the AD curve MPC Multiplier 9.3 Put AD and AS curve together(in the long run) 9.4 Put AD and AS curve together(in the short run) 9.5 Put long-run and short-run together Case1: Full-employed Economy Case2: Boom Case3: Recession
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9.1 AS curve In the long run: Price has enough time to adjust to changes in demand. Price responds to changes in demand to balance the economy. AD changes Price changes Supply does not change In the short run: Price does not have enough time to adjust to changes in demand. Supply changes as demand changes. AD changes Price does not change(or change a little) Supply changes Price,P Long-run AS Y p Output,y Price,P Short-run AS Output,y In the short run, prices are sticky. Example: Employee signs contract with employer to fix the salary. Suppliers sign contract with retailers to fix the price. In the short run: AS changes as a response to changes in demand with small changes in price. In the long run: AS does not depend on price.
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