Class 22 Chapter 22 Basic Supply Side Shock analysi1

Class 22 Chapter 22 Basic Supply Side Shock analysi1 -...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Class 22 Chapter 22 Basic Supply Side Shock analysis a) The current or actual state of the economy [‘temporary’ state] is always given by the b) The expected or sustainable [‘potential’ state] of the economy is given where AD intersects LRAS. c) The sustainability (stability) of the current state is determined by whether or not this current intersection is on the LRAS of not. a. If it is, is will be stable or sustainable. b. If it is not, changes in the economy will occur that brings the intersection to a point on the LRAS. c. We examine the ‘forces’ that bring about this change. (a)
Background image of page 1

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

View Full DocumentRight Arrow Icon
(b) (c) The answer to A14 is given here where the actual equals the potential, the expected or desired state of the economy. Chapter 22 is a discussion of the possibilities involved in this movement to the LRAS.
Background image of page 2
Much of Chapter 22 is not meant to be descriptive of what actually happens in the economy. It is meant to illustrate what would happen—according to the model or theoretically—if a given shock occurs. However, there is one thing to keep in mind while reading the chapter. The chapter assumes for the more part that shifts in aggregate demand and inflation shocks arise autonomously or “come out of nowhere,” that is they are exogenous. Many demand side shock however, arise from an
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

Class 22 Chapter 22 Basic Supply Side Shock analysi1 -...

This preview shows document pages 1 - 4. Sign up to view the full document.

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