PPT-Module Economic Policy and the Aggregate Demand-Aggregate Supply Model

odel KRUGMANS MACROECONOMICS for AP 20 Margaret Ray and David Anderson What you will learn in this Module How the ADAS model is used to formulate macroeconomic policy The rationale for stabilization policy. 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. Aggregate Demand. Aggregate Demand slopes downward like other demand curves, but for different reasons.. Aggregate Demand. An increase in the aggregate price level will cause real spending to decrease. This is seen as a movement upward along a given AD curve. 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. 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). The Influence of Monetary and Fiscal Policy on Aggregate Demand. Monetary policy refers to the control of a country’s quantity of money by its central bank. We saw the . long-run effects. of monetary policy in Chapter 12 (Money Growth and Inflation). Principles of Macro Economics 1. ECONA 201. Introduction to Macroeconomics. Macroeconomics. deals with the economy as a whole; it examines the behavior of economic aggregates such as aggregate income, consumption, investment, and the overall level of prices.. 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..