Lecture 16 - ECONOMICS 100B Professor Steven Wood Lecture...

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ECONOMICS 100B Professor Steven Wood 03/10/11 Lecture 16 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy, or illegally distribute (electronically or otherwise) these notes. Our student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. ANNOUNCEMENTS: Problem Set 3 is due next Tuesday, March 14 th , in class. LECTURE: Today’s lecture focuses on the Aggregate Demand and Supply Curves. CORRECTION TO LECTURE 15 SLIDES: On the PowerPoint slides from Tuesday, it is written that if wages and prices are completely flexible, the sensitivities to the unemployment gap and the output gap (ω and γ) will be 1. This is incorrect, because the Long-Run Phillips Curve and the Long-Run Aggregate Supply Curve are both vertical, which means their slopes must be ∞. The mistake is found on slides 15-17 and 15-35. ICLICKER QUESTIONS/ANSWERS: These are now printed in the Discussion Section problem sets. AGGREGATE DEMAND CURVE: Recall that the aggregate demand curve, AD, is the inverse relationship between inflation and economic output in goods market equilibrium. Every point on the Aggregate Demand curve is a point of equilibrium economic output for a given level of inflation. The AD curve is downward sloping because a rise
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Lecture 16 - ECONOMICS 100B Professor Steven Wood Lecture...

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