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Lecture 8 Outline

Lecture 8 Outline - III I NFLATION A DJUSTMENT(IA A...

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Economics 134 Professor Christina Romer Spring 2012 Professor David Romer LECTURE 8 REVIEW OF THE AD/IA FRAMEWORK FEBRUARY 9, 2012 I. O VERVIEW A. IS-LM appropriate for some questions B. For postwar fluctuations, need to include inflation adjustment II. A GGREGATE D EMAND (AD) A. Working toward a model of inflation and output determination B. Some preliminaries C. Review of the IS curve D. Review of the MP curve E. Deriving the AD curve from the intersection of IS and MP F. What shifts the AD curve?
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Unformatted text preview: III. I NFLATION A DJUSTMENT (IA) A. Behavior of inflation B. IA curve C. Short-run equilibrium D. Transition to long-run equilibrium IV. T WO E XAMPLES OF S HOCKS A. A decrease in government purchases 1. Effect in IS-MP framework 2. Effect in the short run 3. Effect in the long-run 4. Where do we end up? B. An increase in potential output 1. Inflation shock versus supply shock 2. Effect in the short run 3. Effect in the long run 4. Where do we end up?...
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