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ECON 1020H Lecture 6: Class 6, Week 6

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coppertoad266
14 Feb 2017
School
Trent University
Department
Economics
Course
ECON 1020H
Professor
Turner Russell

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Document Summary

Aggregate demand the aggregate quantity of goods and services demanded by all buyers at different price levels. Aggregate supply the aggregate quantity of goods and service produced by all sellers at various price levels. Effects of economics sas is become flatter: inability to raise prices must become more efficient. Terms to remember: surplus, shortage, full employment, recessionary gap, inflationary gap, business expectations and public policy. Consumption: wealth, age of consumer durables, consumer expectation. Investment: interest rates, purchasing prices, operating costs, age of capital goods. Net exports: exchange rates, income levels abroad, price of foreign goods. The o(cid:374)ly 2 thi(cid:374)gs that do(cid:374)"t shift the (cid:272)ur(cid:448)e are pri(cid:272)es a(cid:374)d real gdp (the axis) Las: size of its labor force, productivity or skill level of the work force, size of capital stock, technology. 2: add the price of resources including labor to the above list.

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Related Questions

Explain whether each of the following statements is true or false, justifying your response.

The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

The long-run aggregate supply curve can never shift.

Either a decrease in the nominal money supply by the Federal Reserve, all else held constant, or an increase in the price level, all else held constant, will shift the aggregate demand (AD) curve to the left.

The Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

Evaluate whether each of the following statements is true or false, and explain your answer:

a. The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

b. The long-run aggregate supply curve can never shift.

c. either a decrease in the nominal money supply by the federal reserve, all else held constant or an increase in the price level, all else held constant, will shift the aggregate demand curve to the left.

d. the Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

e. Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.


In late 2004, oil prices increased sharply while the rate of growth in labor productivity declined. The combination of these two factors should shift the short-run aggregate supply curve up (left). The increase in oil prices, when combined with the slowdown in productivity growth, will likely result in higher costs for firms at each output level. To offset these higher costs, firms increase their prices at each output level, causing the short-run aggregate supply curve to shift up (left).