EC140 Lecture Notes - Lecture 9: Aggregate Demand, Government Spending, Aggregate Supply
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EC140 Full Course Notes
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Chapter 23 output and prices in the short run. Deriving the ad curve: changing price level changes the ae curve, equilibrium pairs of price level, real gdp, downward sloping aggregate demand curve. Openness and the slope of the ad curve: price level change has larger effect on output, consumption effect in both open/closed economies, open economies also adjust net exports. *non-price factors that shift ae curve, shift ad curve. With upward sloping as curve, value of multiplier is reduced. Aggregate supply curve has two key features: upward sloping, slope is increasing as real gdp increases. Increasing production causes increases in costs: many firms face diminishing returns to scale. When output is low, easy to expand output. When output is high, difficult to expand further. Increasing slope to as curve affects the multiplier. When output is low, easy to expand output: multiplier is close to simple multiplier (for canada, close to 1. 3)