ECO-2013 Lecture Notes - Lecture 10: Real Interest Rate, Loanable Funds, Aggregate Demand
Document Summary
Anticipated and unanticipated changes: people react and behave differently to events that are foreseen and events that are surprising. Factors that shift aggregate demand: recall two things: Chapter 3- change in demand vs. change in quantity demanded. Remember circular flow diagram- four key markets are connected; a change in one will impact the other: 6 factors that shift ad listed in text: Shifts in aggregate supply: remember to distinguish between the short run and the long run. For the long run, think about capacity. For the short run, think about profits: factors that shift sras: Steady economic growth and anticipated changes in long-run aggregate supply: steady economic growth is desirable because: People will make better decisions than if faced with highly variable changes. Interest rates will rise as demand for loanable funds increases. Foreigners will purchase more us assets; the dollar will appreciate. Sras will begin to fall (shift left) and consumers will buy less (move along ad)
