ECON102 Lecture Notes - Lecture 16: Aggregate Demand, Potential Output, Output Gap

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blushworm378

30 Oct 2018

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Maryann Vaughan

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ECON102 Lecture Notes - Lecture 15: Autonomous Consumption, Consumption Function, Microsoft Powerpoint

ECON102 Lecture Notes - Lecture 16: Aggregate Demand, Potential Output, Output Gap

ECON102 Lecture Notes - Lecture 18: Deflation, Aggregate Supply, Real Wages

Document Summary

Econ 102 chapter 16 chapter 11 & chapter 12. The as-ad model explains the simultaneous determination of real gdp and the price level. Aggregate expenditure curve: relationship between aggregate planned expenditure and real gdp, with all other influences on aggregate planned expenditure remaining the same. Aggregate demand curve: relationship between the quantity of real. Gdp demanded and the price level, with all other influences on aggregate demand remaining the same. When the price level changes, a wealth effect and substitution effects change aggregate planned expenditure and change the quantity of real. Changes in aggregate expenditure and aggregate demand. Equilibrium real gdp and the price level. Increase in aggregated demand fig 12. 3(a) pg 303. (a) initial effect. The ad curve shifts to the right. The initial effect is (cid:809) real gdp and (cid:809)price level. Real gdp > potential gdp -> inflationary gap. (b) the money wage adjusts fig 12. 3(b) pg303. Since gdp > potential gdp, unemployment < natural rate of unemployment.

Related Questions

1. Discuss the difference between an increase in the aggregate demand curve and an increase in the quantity of real GDP demanded. Include a discussion of how the price level relates to each event.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. Describe the difference between a microeconomic demand curve and an aggregate demand curve.

4. The aggregate demand curve portrays the relationship between the price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

5. Explain how changes in the stock of capital affect aggregate supply.

6. What is the natural level of output?

periwinklecrow416

1. Discuss the difference between an increase in the aggregate demand curve and an increase in the quantity of real GDP demanded. Include a discussion of how the price level relates to each event.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. Describe the difference between a microeconomic demand curve and an aggregate demand curve.

5. What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?

6. Shifts in the Aggregate Supply Curves

List and discuss the things that will make the Short Run Aggregate Supply curve shift to the left or to the right. Illustrate.

List and discuss the things that will make the Long Run Aggregate Supply curve shift to the left or to the right. Illustrate.

7. What is the natural level of output?

scarletraven382

10,A change in the price levelâ ________ the AE curve andâ ________ the AD curve.

âshifts; shifts

has no effectâ on; results in a movement along

results in a movementâ along; results in a movement along

results in a movementâ along; shifts

âshifts; results in a movement along

17,When the price levelâ falls, the aggregate planned expenditure curve shiftsâ ________, equilibrium expenditureâ ________ and there is a movementâ ________ along the aggregate demand curve.

âupward; increases; upward

âdownward; decreases; downward

âupward; decreases; downward

âupward; increases; downward

âdownward; increases; upward

21,Which of the following increases the size of the expenditureâ multiplier?

an increase in autonomous spending

a decrease in the marginal propensity to consume

a decrease in the marginal propensity to import

an increase in the marginal income tax rate

an increase in investment

23,If the quantity of real GDP demanded is greater than the quantity of real GDPâ supplied, then

the price level falls and firms decrease production.

aggregate demand changes to restore equilibrium.

the economy must be producing at potential GDP.

the price level falls to restore the macroeconomic equilibrium

the price level rises and firms increase production.

24, ________ can trigger an expansion.

Equality between aggregate expenditure and real GDP

A decrease in induced expenditure

A downward shift of the AE line

An increase in autonomous expenditure

A decrease in autonomous expenditure

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ECON102 Lecture Notes - Lecture 16: Aggregate Demand, Potential Output, Output Gap

ECON102 Lecture Notes - Lecture 15: Autonomous Consumption, Consumption Function, Microsoft Powerpoint

ECON102 Lecture Notes - Lecture 16: Aggregate Demand, Potential Output, Output Gap

ECON102 Lecture Notes - Lecture 18: Deflation, Aggregate Supply, Real Wages

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