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Ch 34 aggregate demand and aggregate supply
Exam 4 will take place on Tuesday May 12 and Wednesday May 13. It will cover Chapters 34, 35, and 36. The final exam is scheduled for Saturday May 23 from 9:00AM to 11:30AM. The document provides an overview of key economic concepts related to aggregate demand, aggregate supply, the economic cycle, and the AD-AS model. It defines important terms and outlines factors that can cause the aggregate demand curve, short-run aggregate supply curve, and long-run aggregate supply curve to shift.
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Ch 34 aggregate demand and aggregate supply
- 1. Exam 4 Tuesday May12 Wednesday May 13 Chapters 34, 35, and 36 Final Saturday May 23 9:00AM - 11:30AM
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- 3. Key Terms recession depression natural rateof output stagflation
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- 7. Recession A period ofdeclining real incomes and rising unemployment defined as negative growth for two quarters (six months)
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- 9. Three Key Facts Irregularand Unpredictable Variables fluctuate together Output falls - Unemployment increases
- 10. Variables GDP Financial System Interest Rates Unemployment MonetarySystem Trade Balance
- 11. Real - Quantities Nominal- Money
- 12. Nominal - alwaysone riyal - fixed Real - what it will buy - varies
- 13. Can you havea nominal change but not a real change? Price level changes but output stays the same Real - Quantity Nominal - Price
- 14. ClassicalView Real qualities matter Amountof money does not matter
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- 16. Long Run andShort Run Good in the short run Bad in the long run Bad in the short run Good in the long run
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- 18. Price Level Quantity of Output Equilibrium price level Equilibrium output AD-AS Model Aggregate Demand Aggregate Supply
- 19. Price Level Quantity of Output Whydoes the demand curve slope downward?
- 20. Price Level Quantity of Output Y1 AggregateDemand Y2 P1 P2 1. real wealth increases 2. interest rates fall 3. exchange rates depreciate increase spending increase investments increase exports
- 21. Price Level Consumption -Wealth Effect Investment - Interest-Rate Effect Net Exports - Exchange-Rate Effect
- 22. Wealth Effect Lower prices Buymore stuff Increase output Higher prices Buy less stuff Decrease output
- 23. Lower prices Need lessmoney 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 Causeinterest 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
- 25. Price Level Quantity of Output DemandShift change in consumption change in investment government purchases net exports
- 26. Price Level Quantity of Output P1 AD-AS Model Aggregate Demand Short Run Aggregate Supply Y1 Y2 P2 Long Run Aggregate Supply P3
- 27. Quiz 1 1. Namethree 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 SlopesDownward Wealth Interest Rate Exchange Rate Shifts Consumption Investment Government Net Exports
- 29. Aggregate Supply Curve TwoCurves Short Run Long Run
- 30. Two Supply Curves ShortRun Long Run
- 31. Short Run Adrenaline Give 110% Pushto exceed normal capacity
- 32. Long Run Run outof Adrenaline Fall back to normal Cannot do 110% forever unless.....
- 33. Long Run SupplyCurve 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 TwoSupply Curves Short-Run Aggregate Supply Long-Run Aggregate Supply Price change does not affect the quantity of goods and services P
- 36. New Capital Human Physical Intellectual Financial Cultural Price Level Quantity ofOutput Two Supply Curves LRAS1 Y1 LRAS2 Y3 LRAS3 Y3
- 37. New Capital Human Physical Intellectual Financial Cultural Price Level Quantity ofOutput Two Supply Curves LRAS1 Y1 LRAS2 Y3 LRAS3 Y3 P1 P2 P3
- 38. 1. Name threereasons 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
- 40. Stagflation A period offalling output and rising prices
- 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
- 42. What if? 1. Newtechnological innovation? 2. Large increase in money supply? 3. People become worried about the future? 4.The supply of water is suddenly reduced?
- 43. What Shifts AggregateDemand? 1. Consumption - tax cut/increase, stock market increase/decrease 2. Investment - interest rate decrease/ increase 3. Government Purchases - More or Less 4. Net Exports - tied to exchange rates
- 44. What Shifts ShortRun Aggregate Supply? 1. Capital: Cultural, Physical, Financial, Human, Intellectual 2. Expectations: decrease-right, increase- left
- 45. 1. Name threereasons why the Aggregate-Demand Curve slopes downward. 2. Name four reasons why the Aggregate-Demand Curve shifts 3. Name three reasons why the Short-Run Aggregate- Supply Curve slopes upward. 4. Name six reasons why the Short-Run Aggregate- Supply Curve shifts Quiz