2. slide 2
Tre modele te ASTre modele te AS
1. Modeli me paga fikse
2. Modeli me informacion joperfekt
3. Modeli me cmime fikse
( )e
Y Y P P= + −α
natural rate
of output
a positive
parameter
the expected
price level
the actual
price level
agg.
output
3. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 3
The sticky-wage modelThe sticky-wage model
Assumes that firms and workers negotiate
contracts and fix the nominal wage before they
know what the price level will turn out to be.
The nominal wage they set is the product of a
target real wage and the expected price level:
e
Wω P= ×
e
W P
ω
P P
⇒ = ×
Target
real
wage
4. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 4
Modeli me Paga fikseModeli me Paga fikse
NQS
e
W P
ω
P P
= ×
e
P P=
e
P P>
e
P P<
Atehere
Papunesia dhe outputi ne
nivelin antyror
Pagat reale me pak se niveli i
targetuar, keshtu firmat
punesojne me shume dhe outputi
rritet me shume se niveli natyror
Pagat reale e tejkalojne, firmat
punesojne me pak punetore dhe
outputi bie.
5. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 6
Modeli me Paga fikseModeli me Paga fikse
Pagat reale duhet te jene kunder ciklike, duhet
te levizin ne drejtim te kundert me outputin me
ciklin e biznesit:
– Ne periudha ekspansioniste, kur P rritet,
pagat reale bien.
– Ne recension, kur P bie, pagat reale bien.
6. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 7
Modeli me informacion joperfektModeli me informacion joperfekt
SUPOZIMET:
Cmimet dhe pagat jane fleksibel, tregjet jane te
pastruara
Cdp ofrues prodhon nje te mire, konsumon
shume te mira
Cdo prodhues njeh cmimin nominal te te mires
qe prodhon, por jo cmimin e plote.
7. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 8
Modeli me informacion joperfektModeli me informacion joperfekt
Oferta e cdo produkti varet nga cmimi relativ: cmimi
nominal pjesetuar me cmimin total
Ofruesi nuk e di cmimin kur vendis sasine e
prodhimit, keshtu qe perdor, P e
.
Supozoni P rritet por P e
jo.
Ofruesi mendon qe cmimet jane rritur, keshtu qe
prodhon me shume.
Ne kete menyre,
Y do te rritet sa here qe P rritet mbi P e
.
8. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 9
Modeli me cmime fikseModeli me cmime fikse
Arsyet per fiksim te cmimeve:
– Kontratat afatgjata midis firmave dhe
konsumatoreve
– Kostot e menuve
– Firmat nukduan te merzisin konsumatoret me
ndryshimin e cmimeve
Supozime:
– Firma vendos cmime
(e.g. ne konkurencen monopolistike)
9. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 10
Modeli me cmime fikseModeli me cmime fikse
Firma vendos
kur a > 0.
Supozoni se ka dy tipe firma:
• Firma me cmime fleksibel, vendos cmime nen
• Firma me cmime fikse, P dhe Y do te jene:
( )p P Y Y= + −a
( )e e e
p P Y Y= + −a
10. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 11
Modeli me cmime fikseModeli me cmime fikse
Supozoni cmime fikse presin qe outputi ne
nivelin natyror. Atehere,
( )e e e
p P Y Y= + −a
e
p P=
s pjesa e firmes me cmime fikse.
11. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 12
Modeli me cmime fikseModeli me cmime fikse
(1−s )P nga te dy anet:
(1 )[ ( )]e
P s P s P Y Y= + − + −a
Cmime fleksibelCmimi fiks
(1 )[ ( )]e
sP s P s Y Y= + − −a
Pjesetuar me s :
(1 )
( )e s
P P Y Y
s
−
= + −
a
12. slide 13
Modeli me cmime fikseModeli me cmime fikse
P e
e larte ⇒ P e larte
nqs firmat rrisin cmimin, atehere firmat qe duhet te
vendosin cmimet te larta.
Cdo firme vendos cmime te larta.
Y I larte ⇒ P i larte
Kur kerkesa per te mira eshte e larte firmat me
cmime fleksibel vendosin cmime te larta.
Sa me i larte fraksioni i frimave me cmime fleksibel,
aq me e vogel eshte s dhe me e larte eshte efekti i
∆Y ne P.
(1 )
( )e s
P P Y Y
s
−
= + −
a
13. slide 14
Modeli me Cmime fikseModeli me Cmime fikse
Derivoni AS duke zevendesuar ne Y :
(1 )
( )e s
P P Y Y
s
−
= + −
a
( ),e
Y Y P P= + −α
where
(1 )
s
s
=
− a
α
14. slide 15
Modeli me cmime fikseModeli me cmime fikse
Ndryshe nga modeli me paga fikse, modeli me
cmime fikse nenkupton nje model prociklike:
Supozoni se outputi agregat/te ardhurat bien.
Atehere,
Firmat presin qe kerkesa te bie.
Firmat me cmime fikse ulin prodhimin dhe ulin
kerkesen per pune.
Zhvendosja majtas e kurbes se kerkeses ben
qe pagat reale ye bien.
16. slide 17
PermbledhjePermbledhje
Supozoni nje shok
pozitiv te AD
dhe P rritet mbi P e
Y
P LRAS
SRAS
1
equation: ( )e
Y Y P P= + −αSRAS
1 1
e
P P=
SRAS
2
AD1
AD2
2
e
P =
2P
3 3
e
P P=
P e
rritet,
SRAS zhvendoset lart,
dhe outputi vendoset ne
nivelin natyror
1Y Y=
2Y
3Y =
17. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 18
Chapter summaryChapter summary
1. Three models of aggregate supply in the short
run:
sticky-wage model
imperfect-information model
sticky-price model
All three models imply that output rises above its
natural rate when the price level falls below the
expected price level.
18. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 19
Chapter summaryChapter summary
2. Phillips curve
derived from the SRAS curve
states that inflation depends on
expected inflation
cyclical unemployment
supply shocks
presents policymakers with a short-run
tradeoff between inflation and unemployment
19. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 20
Chapter summaryChapter summary
3. How people form expectations of inflation
adaptive expectations
based on recently observed inflation
implies “inertia”
rational expectations
based on all available information
implies that disinflation may be
painless
20. CHAPTER 13CHAPTER 13 Aggregate SupplyAggregate Supply slide 21
Chapter summaryChapter summary
4. The natural rate hypothesis and hysteresis
the natural rate hypotheses
states that changes in aggregate
demand can only affect output and
employment in the short run
hysteresis
states that agg. demand can have
permanent effects on output and
employment
Chapter 13 has two parts. The first concerns aggregate supply. In the preceding chapters, we made the simple and extreme assumption that all prices were “stuck” in the short run. This assumption implied a horizontal short-run aggregate supply curve. More realistic models of aggregate supply imply an upward-sloping SRAS curve. Chapter 13 presents three of the most prominent models.
The second half of the chapter is devoted to the Phillips curve and related issues. The section uses a few lines of algebra to derives an expression for the Phillips curve from the SRAS equation. This is followed by a discussion of adaptive and rational expectations, and the sacrifice ratio. The chapter concludes by contrasting the notion of hysteresis to the natural rate hypothesis.
To help your students master the material, it would be helpful to assign homework or in-class exercises in which students use the models to analyze the effects of policies and shocks. Right before the introduction of the Phillips curve would be a good place to have students work an exercise using the IS-LM-AD-AS model with a postively-sloped SRAS curve. The key difference is that, in the short run, a shift in AD causes P to change, which changes M/P, which shifts LM a bit, which explains why the short-run change in output is smaller when SRAS is upward-sloping than when it is horizontal.
I’ve included Figure 13-1 on p.350 of the text as a “hidden slide” in case you wish to “unhide” and include it in your presentation. This figure uses graphs to derive the aggregate supply curve under the assumption of sticky wages.
As you can see, three-panel diagrams do not translate well to the big screen. Fortunately, though, most students readily grasp the intuition on the preceding slide, which sums up as follows: if the nominal wage is fixed, then increases in the price level cause the real wage to fall, which causes firms to hire more workers and produce more output.
If you don’t like the appearance of the term “monopolistic competition” in this slide, just change the parenthetical comment to “(i.e. firms have some market power)” or something to that effect.
The following is not in the text, but you and your students may find it worthwhile:
There are good reasons to believe that the SRAS curve is bow-shaped in the real world; that is, the curve is steeper at high levels of output than at low levels of output. And there are good reasons why we should care about this.
Why the SRAS curve is bow-shaped:
At low levels of output, there are lots of unutilized and under-utilized resources available, so it is not terribly costly for firms to increase output, and therefore firms do not require a big increase in prices to make them willing to increase output by a given amount. In contrast, at very high levels of output, when unemployment is below the natural rate and capital is being used at higher than normal intensity levels, it is relatively costly for firms to increase output further. Hence, a larger increase in prices is required to make firms willing to increase their output.
Why the curvature matters:
When policymakers increase aggregate demand, output rises (good) and prices rise (not good). An important question arises: how much of the bad thing (price increases) must we tolerate to get some of the good thing (an increase output)? The answer depends on how steep the SRAS curve is.
When President Reagan cut taxes in the early 1980s, the economy was just coming out of a severe recession, and was on the flatter part of the SRAS curve; hence, the tax cuts affected output a lot and inflation very little. In contrast, when the current President Bush proposed huge tax cuts during the 2000 election season, we were on the steeper part of the SRAS curve, so the tax cuts would likely have been inflationary. Of course, by the time they were implemented, the economy was in recession, and in any case the bulk of the tax cuts were to be spread out over 10 or 11 years, so they have not proved inflationary.
This graph has two lessons for students:
First, changes in the expected price level shift the SRAS curve (this should be clear from the equation, as should the fact that a change in the natural rate of output will shift the SRAS curve).
The second lesson concerns the adjustment of the economy back to full-employment output.
