PPT-Aggregate Supply, Aggregate Demand, and Inflation: Putting It All Together

Chapter 13 Dünhaupt Dullien Goodwin Harris Nelson Roach Torras Learning goals After todays lecture you will be able to Explain the derivation of the Aggregate Demand curve relating inflation and output levels and how it shifts. Week . 20. Shane Murphy. s.murphy5@lancaster.ac.uk. Office Hours: Monday 3:00-4:00 – LUMS C85. Outline. Roll Call. Problems. Chapter . 33: . Problem . 3. The economy is in a recession with high unemployment and low output.. 29. McGraw-Hill/Irwin. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Aggregate Demand. Real GDP desired at each price level. Inverse relationship. Real balances effect. 12. McGraw-Hill/Irwin. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Aggregate Demand. Real GDP desired at each price level. Inverse relationship. Real balances effect. Chapter . 15 . of . Macroeconomics. , . 8. th. . edition, by N. Gregory . Mankiw. ECO62. . Udayan. . Roy. PART V Topics in Macroeconomic Theory. Inflation and dynamics in the short run. So far, to analyze the short run we have used. Chapter . 15 . of . Macroeconomics. , . 8. th. . edition, by N. Gregory . Mankiw. ECO62. . Udayan. . Roy. PART V Topics in Macroeconomic Theory. Inflation and dynamics in the short run. So far, to analyze the short run we have used. Shane Murphy. www.lancaster.ac.uk/postgrad/murphys4/econ15. s.murphy5@lancaster.ac.uk. Today’s Outline. Week 24 worksheet – Money . & Inflation. Question 1. ISLM analysis (with r and Y on respective axes) is based upon the assumption that prices (P) remained unchanged as the money supply is increased. When that assumption is relaxed, the aggregate demand curve (with P and Y on respective axes) appears. Where the money supply is constant at M1, explain (in no more than 50 words) the representation of the different magnitude of the general level of prices (P1 . Today:. Aggregate demand. Why is it downward sloping?. Factors that affect the aggregate demand. Aggregate supply. Long-run aggregate supply. Short-run aggregate supply. Why is it upward sloping?. Factors that affect the short-run aggregate supply. Derive AS/AD model . Understand cause & consequences of change in AS/AD. Short run vs Long run. Effects on economic growth, prices, unemployment.. Different schools of thought in macroeconomics. Macroeconomic Long Run and Short Run. Derive AS/AD model . Understand cause & consequences of change in AS/AD. Short run vs Long run. Effects on economic growth, prices, unemployment.. Different schools of thought in macroeconomics. Macroeconomic Long Run and Short Run. Aggregate Supply. Learning Objectives. Define the aggregate demand curve. Explain why it slopes downward. Explain why it shifts. Define the aggregate supply curve. Explain why it slopes downward. Explain why it shifts. Day 1. Q1: During the Great Depression we saw a rise in unemployment and deflation. In the recession of 1979-1982 a rise in unemployment but inflation. Why?. Q2: What is stagflation?. Aggregate Supply and Aggregate Demand. Introduction & Determinants. Aggregate Demand Curve . (Inverse) Relationship between price level & quantity of aggregate output demanded for the economy as a whole. Aggregate Price Level (measured with GDP deflator). AD - The Model. PL. RGDP. AD. PL = Price Level. ALL prices in the economy. Real Gross Domestic Product = Dollar value of ALL domestically produced final goods and services adjusted for inflation. AD = Aggregate demand. The total amount of goods and services people will purchase at ALL price levels. Has the same components as GDP.. Paper: Introductory Macroeconomics. Unit: 4. Prepared by. Anindita. . Chakravarty. There are two main causes of . inflation. . Both . are responsible for a . general rise in prices . in an . economy.