ECON102 Lecture Notes - Lecture 9: Human Capital, Aggregate Supply, Output Gap

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ECON102 Full Course Notes
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ECON102 Full Course Notes
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Lecture 9 chapter 9 (aggregate supply & macroeconomic equilibrium) Aggregate supply will be discussed in two ways in this chapter: short-run and long-run aggregate supplies. Macroeconomic equilibrium means that we will combine aggregate demand (from. Chapter 8) and then aggregate supply (from this chapter) and then find the equilibrium for the economy. Output gaps will then be discussed based on the macroeconomic equilibrium, remember there is two types of output gaps, inflationary and recessionary gaps (covered in chapter 6). Inflationary gap: actual gdp is higher than the potential gdp (boom: recessionary gap: actual gdp is less than the potential gdp (bust) Then, we will cover how to close the output gaps using self-correction (automatic) Short-run aggregate supply: shows the positive relation between the price and gdp when all input prices are constant. Contracts fix prices of inputs in the short-run. policies. Short-run (above graph) is sloped positive due to: profit effect: price level increases when the input prices are constant.

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