I. Introduction
A. Objectives
1. What forces drive an economy to grow?
2. What causes inflation?
3. What makes GDP grow at an uneven pace?
4. How do foreign and domestic shocks affect prices and production?
B. Will construct aggregate demand- aggregate supply model to answer those questions.
C. At the end of the lecture you should be able to
1. Understand aggregate demand
2. Understand why aggregate demand changes
3. Understand aggregate supply
4. Understand why aggregate supply changes
5. Understand macroeconomic equilibrium
6. Understand how changes in aggregate demand and supply change the macroeconomic equilibrium
D. Brief Outline of the lecture
1. Introduction to AD-AS model
2. Aggregate Demand
a. The Law of Aggregate Demand
b. Changes in Aggregate Demand
3. Aggregate Supply
a. The Laws of Aggregate Supply
b. Changes in Aggregate Supply
4. Macroeconomic Equilibrium
a. Adjustment to Aggregate Demand shocks
b. Adjustment to Aggregate Supply shocks
II. The Aggregate Demand- Aggregate Supply Model
A. Will build a model that determines the values of:
1. Real GDP (Y) and
2. the GDP deflator (P).
1. Concepts will be similar to microeconomic model of supply and demand.
B. We will use the term "Aggregate Demand" in a very different way than Begg uses it.
1. Begg uses aggregate demand to mean the relationship between aggregate planned expenditure (APE) and real GDP (Y).
a. I will call this the APE curve
2. Begg refers to the relationship between the price level (P) and real GDP (Y) as Macroeconomic Demand. (MD)
a. I will call this the aggregate demand (AD) curve
3. I apologize for the confusion but Begg's terminology is non-standard.
a. Could cause you confusion in advanced courses.
III. The Shape of the Aggregate Demand Curve
(B 26-1)
A. The Aggregate demand (AD) function is a relationship between the level of real GDP (Y) and the price level (P).
1. The Aggregate Demand (AD) function can be represented as:
a. an equation,
b. a schedule and
c. a line on a graph (a curve).
2. The Aggregate Demand (AD) schedule shows the different combinations of the price level (P) and real incomes (Y) at which:
a. aggregate planned expenditures (APE) equals actual output (Y).
APE = Y
b. once interest rates (r) are set at the level required to make the demand for money equal the supply of money.
LL = L
3. The Aggregate Demand Curve is a graphic representation of the Aggregate Demand function.
B. The aggregate quantity demanded (Y) is the sum of the quantities of:
1. consumption goods that households plan to buy (C).
2. investment goods that firms plan to buy (I).
3. goods and services that governments plan to buy (G).
4. net exports that foreigners plan to buy (NX).
AD = Y = C + I + G + NX
B. The aggregate demand schedule is a table that shows the quantity of real GDP (Y) demanded at every price level (P).
C. The aggregate demand (AD) curve plots the amount of real GDP demanded against the price level (P), the GDP deflator.
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A. The Law of Aggregate Demand
1. There is a "Law of Aggregate Demand" corresponding to the microeconomic "Law of Demand"
2. As the price level (P) increases, the amount of real GDP (Y) that households, firms, governments and foreigners plan to buy decreases.
3. The AD curve is downward sloping.
E. There are three reasons for the negative slope of the AD curve:
1. the real money balances effect,
2. the interest rate effect,
3. and the international trade effect.
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The real money balance effect
A. The real balance effect refers to how changes in the quantity of real money (M) affect the quantity of real GDP (Y) demanded.
1. It has been called "the Pigou effect"
a. After A.C. Pigou one of Keynes' teachers.
B. The real balance effect is the increase in consumption demand (C) when the value of consumer's real balances increases.
1. Real balances refers to the quantity of Real money (L)
a. This is the quantity of goods and services that the quantity of nominal money (M) can buy;
2. The quantity of nominal money (M) is simply the total amount of currency (CC) and deposits (DD). (dong or dollars)
M = CC + DD
3. The quantity of real money (L) is measured as the quantity of nominal money (M) (dong or dollars) divided by the price level (P).
L = M / P
4. A decrease in the price level (P) increases the quantity of real money (M),
a. This increases the fraction of the wealth that households keep in the form of money.
b. thereby increasing the demand for goods and services;
c. that is, increasing the aggregate quantity demanded (Y).
5. If the price level (P) goes down,
i. A family will find that its cash holdings (nominal money) (M) are a bigger fraction of its weekly purchases (C) so
ii. It spends a little of its extra nominal money (M) on consumption goods (C) to restore the old ratio.
e.g. Before: The household is in equilibrium
M = 200,000 and C = 100,000
(M = 2 * C)
Prices Fall: The real purchasing power of money (M) increases.
M = 200,000 and C = 50,000
(M = 4 * C)
Household changes its money holding plan to restore its real balances (L) to the old level
M = 100,000 and C = 50,000
(M = 2 * C)
Household plans to spend 100,000 of its MN
When households spend their excess real balances (L), consumption (C) increases.
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A. An increase in the price level will decrease the real money supply (L)
a. That will raise the rate of interest (r)
b. That will discourage investment spending (I) and reduce real GDP (Y)
B. Sometimes, this is called "the Keynes effect"
a. It was first suggested by John Maynard Keynes.
C. Sometimes, it is called "the intertemporal substitution effect"
1. Substituting the purchase of goods and services in the future for the purchase of goods and services today is called "intertemporal substitution".
2. Households and firms will postpone some of their consumption purchases (C) if they can lend their money out at interest.
3. The higher interest rates (r), the greater is the amount of purchases that will be postponed until the future.
4 The higher the interest rates(r), the more there will be intertemporal substitution of future for present goods.
2. A higher interest rate (r) will encourage saving (S) and discourage borrowing.
a. Higher interest (r) will discourage consumption (C), and encourage saving (S) in order to lend your money to a businessman or
b. Higher interest rates (r) will discourage borrowing to buy a TV set (C).
c. Higher interest rates (r) will discourage borrowing to buy a factory (I).
D. Hence, the key to the rate of intertemporal substitution is the effect of the price level (P) on the interest rate (r).
E. A change in the price level (P) alters the interest rate (r) by changing the quantity of real money (L).
1. Given a fixed stock of nominal money (M),
a. A higher price level (P) decreases the quantity of real money (L).
a. That decreases the supply of loans while simultaneously increasing the demand for loans.
b. This raises interest rates (r) and causes people (and firms) to postpone their consumption (C) and investment (I) purchases.
c. This lowers the aggregate quantity demanded for goods (Y).
2. The opposite occurs with a lower price level (P)
a. The sequence of events (the causal mechanism) is as follows:
i. P falls > M rises > Supply of loans increases > demand for loans decreases> r falls> purchases of consumer and investment goods increased.
F. The aggregate demand curve shows the level of output (Y) that would be purchased when we take into account:
1. The changes in interest rates (r) that are induced by changes in the price level (P).
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A. The real balances effect (Pigou effect) and the interest rate effect (Keynes effect) can apply to:
1. A closed economy or
2. An open economy
B. The international effect only applies to an open economy.
C. The international effect is sometimes called "the international substitution effect"
1. International substitution is the substitution of domestic goods and services for foreign goods and services,
a. or of foreign goods and services for domestic goods and services.
D. An increase in the domestic price level (P) makes domestic goods and services more expensive relative to foreign products,
1. Thereby leading to a decrease in the quantity demanded of domestic products.
a. By domestic buyers (more imports (Z))
b. By foreign buyers (less exports (X))
C. Hence an increase in the price level (P) will result in:
1. a decline in net exports (NX) and
2. a decline in real Gross Domestic Product (Y)
D. This effect is assuming that the country's international exchange rate remains constant.
E. The quantitative importance of the international effect depends on:
1. how important is trade in total GDP.
2. The price elasticity of demand of imports (Z) and exports (X).
a. The more elastic the demand, the greater the international effect
F. A short hand term is "international competitiveness"
III. Changes in Aggregate Demand
(B 26-4)
A. The aggregate demand (AD) curve describes aggregate demand at a point in time.
1. It assumes everything is held constant except:
a. the price level (P),
b. interest rates (r) and
c. plans to buy real GDP (Y).
B. Over time, the aggregate demand curve shifts.
C. The main causes of shifts in the aggregate demand curve are changes in four factors:
1. fiscal policy,
2. monetary policy,
3. international factors, and
4. expectations.
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A. Fiscal policy is the government's attempt to influence economic activity using:
1. its spending (G)
2. Transfer payments (TR) and
3. taxes (T).
B. Since government purchases of goods and services (G) is one component of aggregate demand,
1. an increase in government purchases (G) shifts the AD curve to the right.
2. A decrease in taxes (T) or an increase in transfer payments, or benefits (B),
a. increases households' disposable income (YD).
i. This raises people's consumption demand (C),
ii. Thereby shifting the AD curve to the right.
C. The effects of expansionary fiscal policy will be moderated somewhat by increases in interest rates
1. Which are the effect of rising real GDP (Y)
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A. Monetary policy refers to the central bank's attempts to influence the economy by varying:
1. the nominal money supply (M) and
2. interest rates (r).
B. Holding the price level (P) constant, an increase in the quantity of nominal money (M)
1. raises people's real money balances (L).
C. An increase in real money balances (L) leads to an increase in aggregate demand due to the real balance (Pigou) effect.
1. that is, the AD curve shifts to the right.
D. An increase in the real money supply (L) also lowers interest rates (r)
1. Lower interest rates (r) encourage purchasing goods now,
2. Which also causes the AD curve to shift right.
E.. If the central bank takes action to increase interest rates (r) at a given price level (P),
1. that will cause a postponement of:
a. Consumption (C) purchases and
b. Investment (I) purchases
2. That would cause a decrease in aggregate demand (AD).
a. that would shift the aggregate demand curve to the left.
F. Central bank actions in the US have had powerful effects on Aggregate demand
1. and have caused inflations and recessions.
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A. The two International factors affecting the aggregate demand for output are:
1. the foreign exchange rate and
2. foreign income.
B. A decline in the international value of a country's currency ( the foreign exchange rate) makes domestically produced products cheaper relative to foreign products
1. It raises the demand for domestic goods and reduces imports (Z).
2. It increases foreign demand for domestically produced goods, exports (X).
3. That will shift the AD curve to the right.
a.(e.g. as the value of the dong falls,
b. the foreigner's demand for Viet Nam's products will increase.)
C. An opposite shift in the exchange rate will shift the AD curve to the left.
D. An increase in foreigners' incomes will increase their demand for the country's exports (X).
1. That will shift the AD curve to the right.
a. e.g. An increase of incomes in Japan will increase the demand for Viet Nam's exports)
E. A decline in foreigner's incomes will
1. Reduce exports (X) and
2. shift the AD curve to the left
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A. Expectations about the future will have a significant impact on buying plans.
1. If expectations change that can shift the AD curve.
B. Three types of expectations are particularly important. They are expectations about:
1. inflation,
2. future income,
3. and future profits.
C. An increase in the expected inflation rate makes it seem cheaper to buy the goods today.
1. An expected increase in the (EXINFRTE) inflation rate makes it seem that the real value of nominal money balances (M) will decline.
a. So it is better to spend them now.
b. This will increase consumption (C) and Investment (I) spending.
2. An increase in the expected inflation rate (EXINFRTE) thus shifts the current AD curve to the right.
D. An increase in expected future income (EXY) raise people's demand for goods and services (C) today,
1. thereby shifting the AD curve to the right.
E. An increase in expected future profits boosts firms' investment demand, (I)
1. which shifts the AD curve to the right.
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A. All the factors shifting the AD curve may occur with time lags.
1. A time lag is a delay in response to a stimulus.
2. Time lags in changes in AD are often long and unpredictable.
II. Aggregate Supply
(B 26-2)
A. Aggregate supply is a functional relationship between:
1. the price level (P) and
2. the output (Y) that firms wish to produce.
B. Aggregate supply function can be expressed as:
1. an equation,
2. a schedule or
3. a curve.
C. The aggregate supply schedule shows the output (Y) that firms wish to supply at each price level (P).
D. The aggregate quantity supplied of goods and services is the total amount of final goods and services supplied by all the firms in the economy (real GDP) (Y), at a given price level (P).
1. Aggregate quantity supplied is measured as the real GDP (Y) supplied.
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A. The nature of the Aggregate supply relationship depends on the amount of time allowed for adjustment to changes.
1. We will distinguish between two macroeconomic time frames:
a. the short run and
b. the long run.
(B 26-6)
B. The macroeconomic short-run is the period of time during which:
1. the prices of goods and services change in response to changes in demand and supply.
2. But the prices of inputs do not change.
a. Wage rates do not change
b. Prices of raw materials do not change
c. Prices of primary inputs do not change.
d. Prices of intermediate goods do change.
3. In the US, the short run is important because of
a. long term labor contracts
b. contracts for raw materials
C. The macroeconomic long-run is the period of time long enough for the prices of all inputs to adjust.
1. In the long run there is full employment of all factors
2. Unemployment (U) is at its natural rate.
3. Real GDP (Y) is at its potential level (YP)
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A. The short-run aggregate supply (SAS) is the relationship between the aggregate quantity of final goods and services (Y) supplied and the price level (P)
1. holding everything else (including wages) constant.
B. The short run aggregate supply relationship (SAS) can be expressed as:
1. a supply equation
2. a supply schedule or
3. a supply curve.
C. The short run aggregate supply schedule shows the prices charged by firms at each output level,
1. given the wages they pay.
D. The short-run aggregate supply curve, SAS, plots the relationship between:
1. the quantity of aggregate supply (Y) and
2. the price level (P)
3. assuming everything else remains constant, including wage rates.
E. The Short Run Aggregate Supply Curve (SAS) has three ranges:
1. The depression range,
2. the intermediate range, and
3. the physical limit range.
F. The depression range occurs where:
1. firms have excess capacity and
2. will sell additional goods without raising their prices.
a. The SAS is horizontal in this range
b. Every firm has a horizontal supply curve.
c. The Depression range is often called "The Keynesian" range.
d. Begg begins his analysis assuming the economy is in the "Depression" or "Keynesian" range.
G. The intermediate range is where:
1. firms will sell additional output only if the price of the products rises.
a. This portion of the aggregate supply curve is where the economy usually operates.
b. It assumes that firms have upward sloping supply curves.
i. Due to increasing marginal costs per unit.
ii. Increasing marginal costs due to diminishing returns to labor with fixed capital stock.
iii. Increasing marginal costs is not due to an increase in wages. They are assume constant on a given SAS curve.
c. The intermediate range is used throughout the remainder of my short-run analysis.
d. Though Begg first uses the Depression range, later (Ch. 26) he uses the intermediate range.
i. He assumes that SAS in the intermediate range is very flat meaning that a small change in prices would bring about a large change in output.
H. The physical limit range is where:
1. firms are unable to produce any additional output.
a. This is a level of real GDP (Y) much greater than the full-employment or potential output (YP).
b. At this level of output, no more will be produced no matter how high prices go.
c. No economy has reached this level.
2. Some authors call this the "classical range"
a. Most authors refer to the vertical long run aggregate supply curve at the level of natural unemployment as the "Classical range"
b. They define the classical range as the level of potential output (YP)
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A. The long-run aggregate supply (LAS) shows:
1. the relationship between the quantity of goods and services supplied (Y) and
2. the price level (P)
3. when there is full employment.
B. The long-run aggregate supply curve, or LAS, plots this relationship.
1. At the level of real GDP (Y) corresponding to the long run aggregate supply curve (LAS)
a. unemployment (U) is at its natural rate.
C. The LAS is vertical because:
1. there is only one amount of real GDP (Y) that can be produced at full employment (U*).
D. Along the LAS the prices of outputs and the prices of all inputs vary by the same proportion;
1. Given higher output prices and higher input prices,
a. firms do not change the amount of their production.
2. The level of real GDP corresponding to the LAS is less than the physical limit to output
a. The natural rate of unemployment (U*) is greater than zero,
U* > 0
b. The unemployment rate (U) at the physical limit to output is zero
U = 0
3. Begg refers to the level of output corresponding the LAS as the "Potential output" (YP).
4. In the "Classical" model, actual output (Y) is always equal to potential output (YP)
a. This follows from Say's Law "Supply creates its own demand." -
b. There never can be "overproduction"
E. On the short run aggregate supply curve (SAS), when unemployment is above its natural rate,
1. wages will rise faster than prices
a. profits will fall
b. inducing firms to lower output and employment
c. returning the economy to the LAS curve.
F. On the short run aggregate supply curve (SAS), when unemployment (U) is below its natural rate (U*),
1. wages will rise slower than prices
a. profits will rise
b. inducing firms to increase output and employment
c. returning the economy to the LAS curve.
G. Note:
1. A change in output prices (P) causes a movement on the SAS curve.
hence
2. A change in output prices (P) with everything else changing, causes a movement along the LAS curve.
III. Shifts in Aggregate Supply
A. One factor shifts only the short-run aggregate supply curve (SAS);
1. (changes in input prices)
B. Other factors shift both the short-run and long-run aggregate supply curves.
1. e.g. a change in labor supply shifts the SAS and the LAS curve.
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A. The only factor that shifts the SAS but not the LAS is:
1. changes in factor prices.
B. Increases in input prices shifts the SAS curve to the left;
1. The SAS curve rises
C. Decreases in input prices shift the SAS to the right.
2. The SAS curve falls
D. A change input prices won't affect LAS because:
1. output prices (P) will change by the same proportion so that there is no change in real input prices.
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A. Four factors shift both the SAS and LAS curves:
1. the size of the labor force (LF),
2. the capital stock (K),
3. technology, and
4. incentives.
B. The following will shift the LAS curve and cause horizontal parallel shifts of the SAS curve.
1. The larger the labor force (LF), the greater the amount of output that can be produced.
a. Hence, increases in the labor force (LF) shift the aggregate supply curves to the right.
2. The larger the stock of capital (K) --human capital as well as physical capital--the more output can be produced.
a. Therefore, increases in the stock of capital (K) shift the aggregate supply curves to the right.
3. Advances in technology increase the production of output and shift the aggregate supply curves to the right.
4. Incentives, such as unemployment benefits and investment tax credits, affect the aggregate supply curves.
a. If the incentives "favor" producers (such as the investment tax credit), they shift the aggregate supply curve to the right.
b. If the incentives "favor non-producers (such as unemployment benefits), they shift the aggregate supply curves to the left.
c. Viet Nam gives generous severance pay but no unemployment benefits. Shifts outward the SAS and LAS curves.
E. Shifts in the LAS curve are always accompanied by parallel shifts of the SAS curves
1. so they meet the new LAS curve at the old price (P) level.
IV. Macroeconomic Equilibrium
A. To predict changes in output (Y) and prices (P), it is necessary to
1. combine AS and AD curves to
2. determine macroeconomic equilibrium.
B. Macroeconomic equilibrium occurs at the price level (P) where
1. the quantity of real GDP demanded (YD) equals the quantity supplied (YS).
YD = YS
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A. In terms of the SAS/AD diagram, macroeconomic equilibrium is where:
1. the aggregate demand curve (AD) crosses the short run aggregate supply curve (SAS).
2. This determines the equilibrium level of GDP (Y) and the price level (P).
B. If the price level (P) is above equilibrium
1. there will be an excess quantity supplied. (surpluses)
QS > QD
2. Firms will put excess production in inventories (accumulating unwanted inventories)
(UIA) > 0,
3. They will then cut prices and output.
C. If the price level (P) is below equilibrium
1. There will be an excess quantity demanded. (shortages)
QD > QS
2. Firms will sell out of inventories, (drawing down inventories)
(UIA) < 0,
3. They will then raise prices and output.
D If the price level is at equilibrium production just equals sales, inventories remain constant
(UIA) = 0
E. Short run macroeconomic equilibrium does not necessarily occur at full employment (U*).
1. A below full employment short-run equilibrium
a. There is an unemployment short-run equilibrium, when:
i. the AD and SAS curves cross at a level of output less than full employment.
b. At a below full employment equilibrium, the AD and SAS curves intersect to the left of the LAS curve.
c. The result is an recessionary gap
d. A recessionary gap is when actual GDP (Y) is less than long-run GDP or (potential real GDP) (YP).
Y < YP
d. The recessionary gap is equal to long run GDP (or potential GDP (YP)) minus actual GDP (Y).
RG = YP - Y
2. Full-employment equilibrium occurs when the SAS and AD curves cross at the full employment level of output (YP).
Y = YP
a. This means the long-run Aggregate Supply curve (LAS) also goes through the intersection of the SAS and AD curves.
b. Three curves meet at this point.
c. This is also a long-run macroeconomic equilibrium
d. At a full employment equilibrium, there is no inflationary or recessionary gap.
IG = 0 = RG
3. An above full employment equilibrium
a. There is an above full employment short-run equilibrium when:
i. the AD and SAS curves cross at a level of output more than full employment (U*).
Y > YP
b. At an above full employment equilibrium, the AD and SAS curves intersect to the right of the LAS curve.
c. The result is an inflationary gap
d. A inflationary gap occurs when actual GDP (Y) is greater than long-run GDP or potential GDP (YP).
Y > YP
d. The inflationary gap is equal to the actual GDP (Y) minus the long run GDP or potential GDP (YP).
RG = Y - YP
VI. Aggregate Fluctuations and Aggregate Demand Shocks
(B 26-7)
A. Assume that the economy is at a full employment equilibrium (long run macroeconomic equilibrium)
Y = YP
B. Assume an increase in aggregate demand (AD).
1. A rightward shift of the AD curve.
2. It could have been caused by:
a. an increase in the nominal money supply (M).
b. an increase in government spending on goods and services (G)
C. Let us examine the events that follow a demand shock (The disequilibrium dynamics)
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A. In the short run, an increase in the AD curve moves the economy along its SAS curve
1. to a level of real GDP (Y) greater than the full employment amount (YP).
Y > YP
2. The price level (P) rises.
B. Over time, wages and other input costs increase to reflect the higher price level (P).
1. The SAS curve shifts back to the left as wages go up.
2. The economy moves up along the new aggregate demand curve (AD').
a. The price level (P) rises and
b. output (Y) falls.
C. This process continues until real GDP (Y) falls back to the full employment level (YP).
1. At this time, the long run equilibrium is reached, with
a. Real GDP (Y) unchanged and
b. the price level (P) permanently higher.
D. In the long run, an increase in AD only changes the price level (P).
VI. Aggregate Fluctuations and Aggregate Supply Shocks
(B 26-8) (see fig 26-11 oil shock)
A. Assume that the economy is at full employment equilibrium (long run macroeconomic equilibrium)
Y = YP
B. Assume a decrease in short run aggregate supply (SAS).
1 A rightward shift of the SAS curve.
2. Could be caused by an increase in the price of imported oil.
C. Let us examine the events that follow a supply shock (The disequilibrium dynamics)
A. In the short run, an increase in the SAS curve moves the economy along its AD curve to a level of real GDP (Y) less than the full employment amount (YP).
Y < YP
1. The price level (P) rises. (inflation)
2. Output (Y) and employment falls (recession)
3. This is called "stagflation", a combination of recession and inflation.
B. If the government does not intervene to increase aggregate demand,
1. Over time, wages and other input costs decline due to competition for jobs.
a. profits increase
C. The new SAS curve shifts back to the right as wages go down.
1. The economy moves back down the aggregate demand curve (AD) and
a. The price level (P) falls and
b. Output (Y) and employment rises.
D. This process continues until:
1. real GDP (Y) increases to the full employment level (YP).
Y = YP
E. At this time, the long run equilibrium is reached, with
a. real GDP (Y) unchanged
b. the price level (P) unchanged and
c. the wage level permanently lower.
d. the real incomes of workers have fallen
i. But they are employed
X. Summary of the Lecture
Key concepts
1. Above full-employment equilibrium
2. Aggregate Demand (tong cau, nhu cau tong hop)
3. Aggregate demand curve
4. Aggregate demand schedule (Duong tong cau)
5. Aggregate quantity of goods
and services demanded
6. Aggregate quantity of goods
and services supplied
7. Aggregate Supply Schedule (Duong do thi lao dong)
8. Equilibrium aggregate output (Y) (tong san luong can bang)
9. Fiscal Policy (Chinh sach tai koah)
10. Full-employment equilibrium
11. Inflationary gap
12. International effect
13. Interest rate effect
14. Long-run aggregate supply (LAS)
15. Long run aggregate supply curve
16. Macroeconomic Demand schedule (Duong cau mang tinh kinh te hoc vi mo)
17. Macroeconomic equilibrium
18. Macroeconomic long run
19. Macroeconomic short run
20. Monetary policy
21. Potential output (San luong tiem tang)
22. Quantity of money (M)
23. Real money (L)
24. Real money balances effect (Anh huong can doi tien thuc te)
25. Recessionary gap
26. Short-run aggregate supply (SAS)
27. Short run aggregate supply curve
28. Short run aggregate supply schedule (duong tong cung ngan han)
29. Supply side economics (Kinh te hoc trong kung
30. Unemployment equilibrium
Review questions
1. What is the difference between aggregate demand (AD) and aggregate quantity demanded (AQD)?
2. What are the factors that increase aggregate demand? What are the factors that decrease it?
3. What is the difference between the macroeconomic short run and the macroeconomic long run?
4. What is the difference between short run aggregate supply and long run aggregate supply?