ECON 1BB3 Lecture Notes - Lecture 25: Microeconomics, Real Wages, Aggregate Demand
50 views3 pages
17 Sep 2017
School
Department
Course
Professor
adrianagreen0110 and 39672 others unlocked
11
ECON 1BB3 Full Course Notes
Verified Note
11 documents
Document Summary
The ad curve has a negative slope for three reasons: the wealth effect. If the overall price level falls households feel wealthier : so people spend more consumption goes up, y goes up. Money demand curve shifts in to late. Interest rate falls: real exchange rate effect. Income goes up: when prices go down real exchange rate goes down canadian goods are cheap thus net exports go up so output goes up. Anything other than p that affects c,i,g or nx will cause the ad curve to shift. In long run changes in supply change nominal variables but not real variables. Shift: any change in a,k,l,h or n will cause the lras curve to shift. Y* =natural level of output when labour market gives us natural rate of employment. Sras: the slope is positive for three reasons y=y*+a(p-p^e) A= positi(cid:448)e (cid:374)u(cid:373)(cid:271)er, (cid:374)ot (cid:448)aria(cid:271)le, does(cid:374)"t sta(cid:374)d for a(cid:374)(cid:455)thi(cid:374)g.
Get access
Grade+
$40 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers
Related Documents
Related Questions
a) | In the AD-AS model, stagflation does not persist, because the working of the self-correcting mechanism of the economy _____ the level of output and _____ the price level until the economy eventually returns to a long-run equilibrium state, where actual output _____ potential output.
|
b) | The LRAS curve is drawn as a vertical line at potential output (Y*) to indicate that
|
c) | Stagflation arises in the context of the AD-AS model when some external factor causes
|
d) | If the SRAS curve is positively sloped, then a decrease in the demand for Canadian-made goods in Europe will lead to _____ in the price level, in the short run.
|
e) | Which of the following will shift the aggregate demand curve to the right?
|
f) | Suppose a stock market crash decreases the stock of household wealth and therefore causes autonomous consumption to fall. Which of the following is the likely result?
|
g) | An economy is characterized by the AD equation P = 200 ? 0.02Y, SRAS equation P = 100 and LRAS equation Y* = 5000. In the absence of any change in policy or exogenous shocks, this economy will achieve a long-run price level of
|
h) | The AD-AS model depicts a self-correcting economy. This means that the price level in the model adjusts automatically in response to a(n) _____ gap, so as to eliminate the _____ gap in the long run, without requiring any help from government policies.
|
i) | The aggregate demand curve shows
|
j) | Consider an economy initially at long-run equilibrium with output (Y) equal to potential output (Y*). If the SRAS is positively sloped, then a shift to the right of the AD curve will lead to _____ in the price level, in the short run. In the long run, the SRAS curve will shift to the _____ and the equilibrium will be at __________.
|