Pricesriseasfoodbecomesmoreexpensive

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: rve System) Changes in expectations – Especially about GDP Changes in “foreign variables” What happens to the US AD if: What happens to the US AD if: China’s economy slows down? A tax cut increases disposable income? The gloomy economic outlook dampens investment? The US must build infrastructure to host the 2024 Olympics Interest rate cuts encourage investment? Prices rise as food becomes more expensive? Workers become more productive? Aggregate Supply Aggregate Supply AS is the key to macroeconomic policy Aggregate Supply Aggregate Supply AS is the key to macroeconomic policy – If AS is steep – AD shifts have little impact on GDP P AS AD’ AD y Aggregate Supply Aggregate Supply AS is the key to macroeconomic policy – If AS is flat – AD shifts have a large impact on GDP P AD’ AD AS y Aggregate Supply Aggregate Supply AS isthe key to macroeconomic policy In the long run AS is vertical – Set by the a...
View Full Document

This note was uploaded on 02/25/2014 for the course BUSINESS 2101 taught by Professor Gerst during the Spring '12 term at Temple.

Ask a homework question - tutors are online