41. 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
42. 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
48. Long Run
Run out of Adrenaline
Fall back to normal
Cannot do 110% forever
unless.....
49. Long Run Supply Curve
New Capital
Human
Physical
Intellectual
Financial
Cultural
50. 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