Class 23 Chapter 22 Basic Demand Side Shock analysis

Class 23 Chapter 22 Basic Demand Side Shock analysis -...

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Class 23 Chapter 22 Basic Demand Side Shock analysis Remember, shocks are of two kinds: Exogenous—that is, they come from some non-policy source. Endogenous—that is they arise from some policy change with in the economic system. Also, these shocks can be either permanent or temporary. A permanent exogenous supply shock was Chernobyl and Fukushima Nuclear accidents, which permanently altered the expectations about energy. A possible permanent endogenous shock is global warming. If 9-11 is a reflection of a permanent increase in the level of terrorist activity, then terrorism is a permanent exogenous shock which can be fruitfully thought of as either a supply or a demand shock because it has consequences for both AD and AS. Temporary demand shocks are money responses by the FED in response toY2K worries. Other misjudgments of economic problems and changes in policy reactions qualify. Demand shocks can arise from changes in Gov’t spending, which can be permanent or
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.

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Class 23 Chapter 22 Basic Demand Side Shock analysis -...

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