EC140 Lecture Notes - Lecture 9: Aggregate Supply, Aggregate Demand, Demand Curve
![](https://new-preview-html.oneclass.com/06gDVlA8qeMwNreGlqb2j3W524oxrnBz/bg1.png)
EC140 Chapter 24
- Price levels shift the aggregate expenditure curve
o Creates movement along the aggregate demand curve
- Aggregate supply curve shifts when input prices change
- If current price level such that the aggregate quantity demanded exceeded the aggregate
quantity supplied, we would expect
o Price level to increase
▪ Refer to equilibrium quantity demanded/quantity supplied
- Increase in price level causes Aggregate price level to shift down
o Rise in price makes people feel poor and exports will fall, imports will rise
▪ Shifts curve down
• Equilibrium GDP will also fall
o Causes aggregate demand curve to move up – price level vs Real GDP graph
- Shifting the Aggregate demand curve
o Anything that change Aggregate expenditure curve other than price, changes demand
curve
▪ Investment
▪ Government spending
▪ Consumption
▪ Exports or imports → leads to rotations
• must be at the original price level, but shift to either right or left
o Simply multiplied tells us how far income rises, and how far the
demand curve shifts
o Autonomous change x simple multiplier
- Shifting the Aggregate supply curve
o Up/left or down/right
▪ Input prices rise → decrease
• Wages
- Macroeconomic Equilibrium
o If AD is less than AS, then economy is in surplus
o If AD is greater than AS then economy is in shortage
- Aggregate demand shocks
o Rightward shift in aggregate demand → increase real GDP output and increase price
level
- Multiplier
o Aggregate expenditure increase
o Equilibrium requires price level to rise
o Partially mitigates AE increase
o With upward sloping AS curve, value of multiplier is reduced
▪ Change in real GDP is the change in autonomous expenditure from equilibrium
o Change in prices is from the simple multiplier
▪ If supply curve is horizontal, then change in income is driven by simple
multiplier – multiplier = simple multiplier
▪ If supply curve is vertical, multiplier is 0
- Shape of the supply curve
find more resources at oneclass.com
find more resources at oneclass.com
![EC140 Full Course Notes](https://new-docs-thumbs.oneclass.com/doc_thumbnails/list_view/2328948-class-notes-ca-wlu-ec-140-lecture5.jpg)
21
EC140 Full Course Notes
Verified Note
21 documents