Aggregate Output, Prices, and Economic Growth III von Edu Pristine

Dozent des Vortrages Aggregate Output, Prices, and Economic Growth III

Edu Pristine

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• ... in and movements along aggregate demand and supply curves ...

• ... economic growth " Aggregate demand curve is downward sloping  Change in the price level cause changes in aggregate demand:movement along the curve.  AD = C + I + G + (X-M) " Factors affecting AD curve:  Increase in consumers  ...

• ... output prices  Taxes and government subsidies  Exchange rates " Not all factors that affect SAS affect LAS, factors affe cting LAS are:  Supply and quality of labor  Supply of natural resources  Stock of ...

• ... Effects on LAS and SAS from an increase in full- employment GDP, due to an increase in labor , capital or an advance in technology. ...

• ... A. An expectation of higher income in the future B. An appreciation of country s currency with respect to outside world. C. Increase in money supply ...

• ... " B.  When the aggregate demand increases it shifts towards right. An appreciation of country s currency with respect ...

• ... to cause a shift in long- run aggregate supply? A. Warfare destroys a large ...

• ... supply. LAS is influenced by changes in the quantity of labor, the ...

• ... and prices levels in response moving the economy toward long-run equilibrium (price level of 100)  If the price level were 80, there would be excess demand for real goods and services. Businesses will experience unintended decreases in inventories and respond by increasing output and prices. This moves economy along the aggregate demand curve toward ...

• ... Long Run equilibrium (below full employment) " Long-run disequilibrium arises when level of output is above or below full-employment GDP " Two situations when economy is in short-run equilibrium but not in long-run equilibrium  Recession (below full employment): Short-run equilibrium real ...

• ... the full- employment level when aggregate demand has grown faster than LAS. The result will be upward pressure on prices that will result in inflation as the general price level increases from P1 to P* ...

• ... employment with real GDP at GDP1 GDP* GDP 1 AD1 AD0 Real O/P GDP Adjustment to an increase in aggregate demand " Increase in AD pushes new SR equilibrium at above full employment and real wages to fall  From an initial state of long-run ...

• ... wages constant in SR) " Increase in demand will have no impact on LR macroeconomic equilibrium " Increase in demand will cause businesses to attempt to increase production by hiring more workers ðÞincreased money wage demands ðÞshift in the SAS curve from SAS0 to SAS1 " This will restore LR macroeconomic equilibrium at full- employment real GDP ...

• ... " Decrease in AD will have opposite impact  Decrease in AD from AD0 to AD1 will lead to a new short-runequilibrium with the price level at PSR and real GDP at GDP1 which is less than full-employment GDP (a recession)  Resulting excess supply of labor (workers seeking jobs) will put downward pressure on money wage rates and other resource prices ðÞshift in SAS to ...