ECON 104 Lecture Notes - Lecture 9: Aggregate Demand, Potential Output
29 Jul 2016
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Document Summary
Gdp over time: high-point= peak, local low-points= trough, period between trough and peak= expansion, period between peak and trough= contraction. Contraction of 2 or more quarters= recession. Recession= large number of business bankruptcies and bank accounts becoming depleted, suicide and divorce rates rise, social unrest rises, amount of people going into prison rises. Model of aggregate demand and aggregate supply: price level= price of all goods, law of demand does not apply to ad, aggregate demand: Less real income than they had before (makes them poorer) Reduces real value of consumers" saving and consumption and therefore decreases real gdp. Price level increase causes decline in u. s. exports: aggregate supply: Slopes upward because if there"s an increase in ad, there"s an upward pressure on final goods and greater input prices. Changes in resources= change along real horizontal axis. Changes in price of inputs= change along price level vertical axis.
