12. Aggregate Demand and Aggregate Supply Analysis

12. Aggregate Demand and Aggregate Supply Analysis -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Aggregate Demand and Aggregate Supply Analysis - Aggregate Demand Curve – a curve that show the relationship between the price level and the quantity of real GDP demanded by households, firms, and 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 - GDP= C (consumption)+ I (Investment) + G (Government Purchases) + NX (Net Export) - The impact of the price level on investment is known as the interest-rate effect - Aggregate demand curve tells us the relationship between the price level and quantity of real GDP demanded, holding everything else constant. - The variables that causes Aggregated demand curve to shifts are Changes in government policies (fiscal, monetary) Change in the expectations of households and firms (inflation, unemployment) Change in foreign variables (import, export) - Monetary policy – that actions the Federal Reserve takes to manage the money supply and interest rate to pursue macroeconomic policy objectives
Background image of page 1

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

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: -Fiscal policy changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.-Long-run Aggregate Supply Curve a curve that shows the relationship in the long run between price level and the quantity of real GDP supplied-Short run aggregate curve shifts when Change in Labor Force or capital Stock Technological Change Expected Change in the future price level Adjustment of workers and firms to error in past expectation about the price level-Explanation to why short-run aggregate supply curve slopes upward are Contracts make some wages and prices sticky Firms are often slow to adjust wages Menu cost - (The costs to firms of changing prices), make some prices sticky-Supply Shock an unexpected event that causes the short-run aggregate supply curve to shift.-Stagflation a combination of inflation and recession, usually resulting from a supply shock...
View Full Document

Page1 / 2

12. Aggregate Demand and Aggregate Supply Analysis -...

This preview shows document pages 1 - 2. Sign up to view the full document.

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