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ECN 203 Study Guide - Quiz Guide: Aggregate Supply, Aggregate Demand

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blushbat715
29 Oct 2015
School
Syracuse University
Department
Economics
Course
ECN 203
Professor
Ashby

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Document Summary

Aggregate demand (ad: why is ad downward sloping, aggregate expenditure, ae. Aggregate supply: long-run aggregate supply (las) Long run: markets have fully adjusted and economy has reached yf: short-run aggregate supply (as) Shifts in as changes in basic costs of production in the economy (change in wages across the economy or in price of oil) Macro model combining as, ad and las o o. Shows current conditions in economy: real gdp (y), price level (p) and unemployment. Investment (i) determined in long-term (financial) capital market: supply of financial capital. Upward sloping as interest rate (r) increases, more willing to lend capital. What shifts supply of financial capital: demand for financial capital. Downward sloping at higher r, willing to borrow less. Demonstrate graphically how a change in business confidence (increase or decrease) will affect i, r, y and p.

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Related Questions

The aggregate supply (AS) and aggregate demand (AD) model describe the condition of the overall economy; this model is used to predict changes in the price level and output from external shocks to the economy and various government policies.

Please describe what the aggregate supply and aggregate demand curves represent; explain what accounts for their shape (i.e., downward sloping AD and upward sloping AD); and give examples of at least two factors each that might result in a shift in AD and AS.

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.



In the summer of 1953, the Korean War ended and government expenditures decreased. In terms of the AS-AD model, this change should have shifted the AD curve to the left. A cut in government spending reduces economic activity and shifts the AD curve to the left.

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.

A fall in the value of the dollar makes U.S. goods cheaper to foreigners and foreign goods more expensive to U.S. citizens. This shifts the U.S. aggregate demand curve to the right.