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Chapter 14 Notes FULL lecture notes for Chapter 14

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Department
Economics
Course
ECON 102
Professor
Angela Trimarchi
Semester
Fall

Description
Econ 102 Chapter 14 NotesProf Angela TrimarchiChapter 14Aggregate Demand and Aggregate Supply 1IntroductionRecessionshttpenwikipediaorgwikiRecessionThree Key Facts about Economic FluctuationsEconomic Fluctuations are IrregularUnpredictableMost Macroeconomic Quantities Fluctuate TogetherAs Output Falls Unemployment RisesOkuns LawChange in cyclical unemploymentpercent change in real GDP4ExerciseoCalculate the change in cyclical unemployment when real GDP grows at an average rate of 305Aggregate Demand and Aggregate Supply ModelUsed to explain shortrun fluctuations in the economic activity around its longrun trendAggregate Demand Shows the relationship between the aggregate price level and the total quantity of aggregate output demanded by households businesses and the governmentAggregate Demand CurveGraphs output Y and the price level PAggregate demand curve is downward slopingSlope of the Aggregate Demand CurveRecall the basic equation of national income accountingGDPC IG XIMDiagram 1Aggregate Demand CurveEcon 102 Chapter 14 NotesProf Angela TrimarchiPAD0YAggregate demand curve slopes downward for reasons other than individual demand curveExportImport EffectInterest Rate Effect on InvestmentAD curve is drawn holding all other variables constantie the money supply and FXRExportImport EffectAn decrease in the Canadian price level holding the foreign exchange rate constant makes Canadian goods cheaper than foreign goodsThis increases exports of Canadian goods anddecreases imports of foreign goodsBecause exports increase net exports increase And so the quantity of Canadian goods and services demanded at a lower Canadian price level risesExampleAssume the nominal exchange rate is constantRecall the definition for the real exchange ratee ePPnomF Assume e is 4 euros per dollarnomP 200
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