MGEA01H3 Lecture Notes - Lecture 12: Potential Output, Production Function, Price Level

42 views14 pages

limehorse214

14 Apr 2016

School

UTSC

Department

Economics for Management Studies

Course

MGEA01H3

Professor

Iris Au

For unlimited access to Class Notes, a Class+ subscription is required.

meghan78 and 39778 others unlocked

MGEA01H3 Full Course Notes

Verified Note

10 documents

Document Summary

Chapter 12 aggregate demand and aggregate supply (part 1) Why is the aggregate demand curve downward sloping? (cid:120) the national income identity (chapter 7): Price demand. (cid:159) there should be no change in aggregate. 2 (cid:120) a downward sloping ad curve can be explained by the wealth effect and the interest rate effect. When p up, c down, i planned down and nx down=ae planned down to ae (p1) Note: ae0 = [ac + ai + g + x0 im0 mpc t0 + mpc tr0 d i] because. C = ac + mpc yd, where yd = y t + tr. Iplanned = ai d i, where i = i . Tr = tr0 (in the meantime & will be. Shifts in the aggregate demand curve (cid:120) the ad equation in generic form: Factors that cause ad shifting to the right. Incentive to invest increases of physical capital is low.

Related Questions

What is aggregate demand?

What is Aggregate Demand?

Aggregate Demand refers to the total expenditure on domestic goods and services within an economy. The Aggregate Demand (AD) thus represents the relationship between the total quantity of output demanded in the economy and the overall price level. Like the basic demand curve, the AD curve also slopes downward to reflect the inverse relationship between aggregate price and aggregate quantity demanded.

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. 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

Explain whether each of the following statements is true or false, justifying your response.

The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

The long-run aggregate supply curve can never shift.

Either a decrease in the nominal money supply by the Federal Reserve, all else held constant, or an increase in the price level, all else held constant, will shift the aggregate demand (AD) curve to the left.

The Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

skywalrus152

MGEA01H3 Lecture Notes - Lecture 12: Potential Output, Production Function, Price Level

MGEA01H3 Full Course Notes

Document Summary

Get access

Related Documents

MGEA01H3 Lecture Notes - Lecture 3: Demand Curve, Economic Equilibrium, Sport Utility Vehicle

MGEA01H3 Chapter Notes - Chapter 4: Price Elasticity Of Demand, Diet Pepsi, Demand Curve

MGEA01H3 Lecture Notes - Lecture 7: Demand Curve, Real Interest Rate, Government Budget Balance

Related Questions

What is Aggregate Demand?