Unformatted text preview: shocks. Formulae Aggregate supply = Y = Ynatural + a(P  Pexpected) In this formula Y is output, Ynatural is the natural rate of output that exists when all productive factors are used at their normal rates, a is a constant greater than zero, P is the price level, and Pexpected is the expected price level. Aggregate demand = Y = C(Y  T) + I(r) + G + NX(e) In this formula, Y is output, C(Y  T) is consumption as a function of disposable income, I(r) is investment as a function of the real interest rate, G is government spending, and NX(e) is net exports as a function of the real exchange rate....
View
Full Document
 Fall '08
 JOMINY
 Microeconomics, Inflation, Supply And Demand, Supply shock, aggregate supply curve, Ynatural

Click to edit the document details