Lecture16+-+The+Phillips+Curve+and+Aggregate+Supply

The more exible wages and prices are 1 the more

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Unformatted text preview: Econ 100B: Macroeconomics 29/ 36 The Aggregate Supply Curve Inheritance from the Phillips curve Because the short-run Phillips curve embeds sticky wages and prices: The short-run aggregate supply curve also embeds sticky wages and prices. The more flexible wages and prices are: 1 the more inflation responds to the output gap, 2 the higher the value of 3 the steeper the short-run aggregate supply curve. Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins and, Econ 100B: Macroeconomics 30/ 36 The Aggregate Supply Curve Factors that will shift the LRAS curve 1 A change in total factor productivity, A. 2 A change in capital, 3 A change in labor, 4 A change in the natural rate of unemployment, K. L. Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins Econ 100B: Macroeconomics UN . 31/ 36 The Aggregate Supply Curve Factors that will shift the SRAS curve 1 A change in expected inflation, 2 A price shock, ⇢. 3 A persistant output gap, Y ⇡e . Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins YP . Econ 100B: Macroeconomics 32/ 36 The Short-Run PAggregate Supply Curve: ⇡ t = ⇡t 1 + Yt Y + ⇢t A change in expected inflation, LRAS e SRASπ =π1 1 INFLATION e SRASπ =π0 0 π1 π0 YP OUTPUT Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins Econ 100B: Macroeconomics 33/ 36 ⇡e . The Short-Run PAggregate Supply Curve: ⇡ t = ⇡t 1 + Yt Y + ⇢t LRAS A price shock, ⇢. e SRASπ =π1 1 INFLATION e SRASπ =π0 0 π1 π0 YP OUTPUT Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins Econ 100B: Macroeconomics 34/ 36 The Short-Run PAggregate Supply Curve: ⇡ t = ⇡t 1 + Yt Y + ⇢t A persistant output gap, Y e SRASπ =π3 2 INFLATION LRAS e SRASπ =π1 1 πe=π0 π3 SRAS0 π2 π1 π0 Y1 YP OUTPUT Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins Econ 100B: Macroeconomics 35/ 36 YP . The Aggregate Supply Curve Looking forward: Combining the short-run and long-run aggregate supply curves with the aggregate demand curve provides a model of short-run fluctuations in: 1 economic output, Y , and 2 inflation, ⇡ . Lecture 16 – Phillips Curve & Aggregate Supply: R. J. Hawkins Econ 100B: Macroeconomics 36/ 36...
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This note was uploaded on 09/08/2013 for the course ECON 100B taught by Professor Wood during the Summer '08 term at University of California, Berkeley.

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