More Related Content Similar to 4. short run economic fluctuations (20) More from Ghanshyam Gupta (20) 5. Figure 1 A Look At Short-Run Economic Fluctuations Billions of 1996 Dollars Real GDP (a) Real GDP $10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1965 1970 1975 1980 1985 1990 1995 2000 Copyright © 2004 South-Western 7. Figure 1 A Look At Short-Run Economic Fluctuations Billions of 1996 Dollars (b) Investment Spending $1,800 1,600 1,400 1,200 1,000 800 600 400 200 1965 1970 1975 1980 1985 1990 1995 2000 Investment spending Copyright © 2004 South-Western 9. Figure 1 A Look At Short-Run Economic Fluctuations Percent of Labor Force (c) Unemployment Rate 0 2 4 6 8 10 12 1965 1970 1975 1980 1985 1990 1995 2000 Unemployment rate Copyright © 2004 South-Western 15. Figure 2 Aggregate Demand and Aggregate Supply... Quantity of Output Price Level 0 Copyright © 2004 South-Western Aggregate supply Aggregate demand Equilibrium output Equilibrium price level 17. Figure 3 The Aggregate-Demand Curve... Quantity of Output Price Level 0 Copyright © 2004 South-Western Aggregate demand P Y Y 2 P 2 1. A decrease in the price level . . . 2. . . . increases the quantity of goods and services demanded. 24. Shifts in the Aggregate Demand Curve 0 P 1 Y 1 Quantity of Output Price Level Aggregate demand, D 1 D 2 Y 2 27. Figure 4 The Long-Run Aggregate-Supply Curve Quantity of Output Natural rate of output Price Level 0 Copyright © 2004 South-Western Long-run aggregate supply P 2 1. A change in the price level . . . 2. . . . does not affect the quantity of goods and services supplied in the long run. P 31. Figure 5 Long-Run Growth and Inflation Quantity of Output Price Level 0 Copyright © 2004 South-Western Y 1980 AD 1980 AD 1990 Aggregate Demand, AD 2000 Long-run aggregate supply, LRAS 1980 Y 1990 LRAS 1990 Y 2000 LRAS 2000 P 1980 1. In the long run, technological progress shifts long-run aggregate supply . . . 4. . . . and ongoing inflation. 3. . . . leading to growth in output . . . P 1990 P 2000 2. . . . and growth in the money supply shifts aggregate demand . . . 34. Figure 6 The Short-Run Aggregate-Supply Curve Quantity of Output Price Level 0 Copyright © 2004 South-Western Short-run aggregate supply 1. A decrease in the price level . . . 2. . . . reduces the quantity of goods and services supplied in the short run. Y P Y 2 P 2 41. Figure 7 The Long-Run Equilibrium Quantity of Output Price Level 0 Copyright © 2004 South-Western Natural rate of output Short-run aggregate supply Long-run aggregate supply Aggregate demand A Equilibrium price 42. Figure 8 A Contraction in Aggregate Demand Quantity of Output Price Level 0 Long-run aggregate supply Copyright © 2004 South-Western Short-run aggregate supply, AS Aggregate demand, AD A P Y AD 2 AS 2 1. A decrease in aggregate demand . . . 2. . . . causes output to fall in the short run . . . 3. . . . but over time, the short-run aggregate-supply curve shifts . . . 4. . . . and output returns to its natural rate. C P 3 B P 2 Y 2 45. Figure 10 An Adverse Shift in Aggregate Supply Quantity of Output Price Level 0 Long-run aggregate supply Copyright © 2004 South-Western Aggregate demand 3. . . . and the price level to rise. 2. . . . causes output to fall . . . 1. An adverse shift in the short- run aggregate-supply curve . . . Short-run aggregate supply, AS Y A P AS 2 B Y 2 P 2 48. Figure 11 Accommodating an Adverse Shift in Aggregate Supply Quantity of Output Natural rate of output Price Level 0 Long-run aggregate supply Aggregate demand, AD Copyright © 2004 South-Western Short-run aggregate supply, AS P 2 A P AS 2 3. . . . which causes the price level to rise further . . . 4. . . . but keeps output at its natural rate. 2. . . . policymakers can accommodate the shift by expanding aggregate demand . . . 1. When short-run aggregate supply falls . . . AD 2 C P 3 Editor's Notes Remove bullet in graph – graph needs no additional title??? The order of discussion in Mankiw has been changed. The “misperceptions theory” must be moved to the bottom of the list. (This may affect the entire order of presentation following this slide.) Move this slide so that it follows the next two slides. That puts the discussion in the new order of the text. For consistency, title this slide, “Why the Aggregate supply curves slopes upward in the short run” like the previous two slides. Then move “The sticky-price theory” in large print to the top bullet (like the previous two slides). Should title be, “Why the short-run aggregate supply…” Bullet three, move the misperceptions theory to the end.
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