23. Lower prices
Need less money
More money to loan
Lower rates
Borrow easy
Buy more stuff
Increase output
Interest Rate Effect
Higher prices
Need more money
Less money to loan
Higher rates
Borrow harder
Buy less stuff
Decrease output
24. Exchange-Rate Effect
Lower prices
Cause interest rates to decline
Causes currency to depreciate
Stimulates demand for local
currency
Stimulates exports
Increases local output
Higher prices
Cause interest rates to increase
Causes currency to appreciate
Stimulates demand for foreign
currency
Stimulates imports
Decreases local output
27. Quiz 1
1. Name three reasons why the Aggregate-
Demand Curve slopes downward.
2. Name four reasons why the Aggregate-
Demand Curve shifts
Wealth, Interest Rate, Exchange Rate
Consumption, Investment, Government, Net
Exports (C + I + G + NX)
28. Aggregate Demand Curve
Slopes Downward
Wealth
Interest Rate
Exchange Rate
Shifts
Consumption
Investment
Government
Net Exports
32. Long Run
Run out of Adrenaline
Fall back to normal
Cannot do 110% forever
unless.....
33. Long Run Supply Curve
New Capital
Human
Physical
Intellectual
Financial
Cultural
34. Price
Level
Real GDP orY
AD- AS Model
Aggregate
Demand
Short Run
Aggregate
Supply
Long Run
Aggregate
Supply
LRAS
Shape -Vertical
Capacity fixed
Shift
Physical
Financial
Human
Intellectual
Cultural
SRAS
Shape - Slope Up
Sticky Wages
Sticky Prices
Misperceptions
Shift
Physical
Financial
Human
Intellectual
Cultural
Expectations
AD
Shape - Slope Down
Wealth Effect
Interest Effect
Exchange Effect
Shift
Consumption
Investment
Government
Net Exports
35. Price
Level
Quantity of Output
Two Supply Curves
Short-Run
Aggregate
Supply
Long-Run
Aggregate
Supply
Price change
does not
affect the
quantity of
goods and
services
P
38. 1. Name three reasons why the Short-Run
Aggregate-Supply Curve slopes upward.
2. Name six reasons why the Short-Run
Aggregate-Supply Curve shifts
Sticky Wage, Sticky Price, Misperceptions
Capital (5 things) and Expected Price Level
Quiz
39. 4 Step Analysis
1. Decide what curve the event affects.
2. Decide direction of the shift
3. Diagram impact
4. Analyze short-run to long-run
41. Remember
1.Three curves:AD, SRAS, LRAS
2. Event can affect one or more of the
curves
3. Determine which curve and which
direction.
4. Diagram impact