chapter 19 aggregate demand and aggregate supply

chapter 19 aggregate demand and aggregate supply - CHAPTER...

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CHAPTER 19 Aggregate Demand and Aggregate Supply
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                    Chapter Nineteen 2 of 25 Lecture Outline 1. Sticky prices versus flexible prices and their macroeconomic consequences 2. Understanding aggregate demand a. What is the aggregate demand curve? b. Factors that shift the aggregate demand curve c. What is the multiplier? 3. Understanding aggregate supply a. What is the aggregate supply curve? b. Long-run aggregate supply c. Short-run aggregate supply d. Supply shocks FYR
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                    Chapter Nineteen 3 of 25 Sticky Prices and Their  Macroeconomic Consequences Auction prices : prices which are very flexible Custom prices : prices are not flexible, e.g. input prices, including labour Sticky wages sticky prices
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                    Chapter Nineteen 4 of 25 The short run in macroeconomics is the period in which prices don’t change or don’t change very much. In the macroeconomic short run, both formal and informal contracts between firms mean that changes in demand will be reflected primarily in changes in output, not prices.
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                    Chapter Nineteen 5 of 25 Understanding  Aggregate Demand Aggregate demand is the total demand for goods and services in an entire economy. Aggregate demand curve : a downward- sloping curve that shows the relationship between the level of prices and the quantity of real GDP demanded.
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                    Chapter Nineteen 6 of 25 The Components of Aggregate Demand Four components of GDP: Consumption spending ( C ), investment spending ( I ), government purchases ( G ) and net exports ( NX ). Also the four components of aggregate demand.
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                    Chapter Nineteen 7 of 25 Why the Aggregate Demand Curve Slopes Downward As the price level or average level of prices in the economy changes, so does the purchasing power of your money. The change in the purchasing power of money will affect aggregate demand in 3 ways.
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                    Chapter Nineteen 8 of 25 The wealth effect: The increase in spending that occurs because the real value of money increases when the price level falls. The
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This note was uploaded on 02/12/2012 for the course ECON EC1101 taught by Professor Ms during the Spring '08 term at National University of Singapore.

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chapter 19 aggregate demand and aggregate supply - CHAPTER...

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