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Econ 2020, Topic 5

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Lecture materials for Topic 5: AD/AS

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Econ 2020, Topic 5

  1. 1. AD/AS Model Spring 2013 Topic 5
  2. 2. The PPF (again)2 dimensional modelShifters
  3. 3. LRAS CurveReducing two dimensions to one
  4. 4. LRAS CurveReducing two dimensions to oneRegions
  5. 5. LRAS CurveReducing two dimensions to oneRegionsShifters
  6. 6. LRAS CurveReducing two dimensions to oneRegionsShiftersPre-Keynesian understanding of productionA static model of a dynamic economy
  7. 7. The circular flow (again) Basic model
  8. 8. The circular flow (again) Basic model Full(er) model Leakages Injections
  9. 9. The circular flow (again) Basic model Full(er) model Size determines Nominal GDP ∑ PxQ
  10. 10. AD Curve
  11. 11. AD CurveSlope Real Balances Effect Interest Rate Effect Foreign Purchases Effect
  12. 12. AD CurveSlopeShifters Leakages Injections
  13. 13. LR EquilibriumIntersection of LRAS/ADExamples of change Consumer confidence Tax rates Government expenditures Money supply
  14. 14. LR EquilibriumIntersection of LRAS/ADExamples of change Labor force Regulations Technology change
  15. 15. Does this match reality?
  16. 16. SRAS CurveConstant input costs Wages Energy prices
  17. 17. SRAS CurveConstant input costsWhy might they be constant? Sticky wage theory
  18. 18. SRAS CurveConstant input costsWhy might they be constant?Diminishing marginal productivityEffect on per unit costs?
  19. 19. SRAS Curve
  20. 20. SRAS CurveShifters Factors of production Costs of production
  21. 21. SR Equilibrium
  22. 22. SR EquilibriumExamples of change Tax rates Interest rates Labor force Oil prices
  23. 23. Self correcting mechanism
  24. 24. Self correcting mechanism
  25. 25. ExamplesGovernment spendingMoney supplyInvestor confidence
  26. 26. A special case: OPECStagflation
  27. 27. The Great Recession
  28. 28. The Great RecessionGovernment policy changesTechnological changesRegulatory changesBehavioral changes

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