Ch24 - Cha pte r 24 Aggregate Demand and Aggregate Supply...

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Prepared by: Chapter 24 Aggregate Demand and Aggregate Supply Analysis
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The Fortunes of FedEx Follow the Business Cycle 24.1 Identify the determinants of aggregate demand and distinguish between a movement along the aggregate demand curve and a shift of the curve. 24.2 Identify the determinants of aggregate supply and distinguish between a movement along the short- run aggregate supply curve and a shift of the curve. 24.3 Use the aggregate demand and aggregate supply model to illustrate the difference between short-run and long-run macroeconomic equilibrium . Learning Objectives To understand why FedEx and other firms are affected by the business cycle, we need to explore the effects that recessions and expansions have on production, employment, and prices.
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Long-Run Economic Growth Long-run economic growth: The process by which rising productivity increases the average standard of living. FIGURE 21.1 The Growth in Real GDP per Capita, 1900–2006
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Aggregate Demand Learning Objective 24.1 Aggregate demand and aggregate supply model A model that explains short-run fluctuations in real GDP and the price level. FIGURE 24.1 Aggregate Demand and Aggregate Supply
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Aggregate Demand Learning Objective 24.1 Aggregate demand curve A curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government. Short-run aggregate supply curve A curve that shows the relationship in the short run between the price level and the quantity of real GDP supplied by firms.
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Aggregate Demand Learning Objective 24.1 GDP has four components: consumption ( C ), investment ( I ), government purchases ( G ), and net exports ( NX ). If we let Y stand for GDP, we can write the following: Y = C + I + G + NX Why Is the Aggregate Demand Curve Downward Sloping? The Wealth Effect: How a Change in the Price Level Affects Consumption The impact of the price level on consumption is called the wealth effect .
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Aggregate Demand Learning Objective 24.1 The impact of the price level on investment is
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Ch24 - Cha pte r 24 Aggregate Demand and Aggregate Supply...

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