This preview shows page 1. Sign up to view the full content.
Unformatted text preview: make a boost in output In the long run, what matters is the intersection between aggregte demand and long run aggregate supply (which is equal to Y) (which is vertical)-the intersection happens at Short run aggregate supply (upward sloping) Stock Market Crash-Will change aggregate demand – shift down to the left-Y = AxF(K,L,H,N) = LRAS – stock market crash does not destroy machines, population, human resources, natural resources, or technology-C falls, SR equilibrium lower, and unemployment falls o Over time, Expected Price (Pe) falls, so SRAS shifts right, until LR equilibrium at C. Y and unemployment back at initial levels Oil prices increases-SRAS shifts to the right,-We get higher prices, higher unemployment, and lower production-Stagflation (lower wages, higher prices) o Government has to start hiring more public employees o Create occupation, expand monetary policy...
View Full Document
This note was uploaded on 01/14/2012 for the course ECON 002 taught by Professor Eudey during the Fall '08 term at UPenn.
- Fall '08