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MGEA06H3 Lecture Notes - Lecture 6: Shortage, Aex Index, Aggregate Supply

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School
UTSC
Department
Economics for Management Studies
Course
MGEA06H3
Professor
Iris Au

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MGEA06H3 Full Course Notes
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MGEA06H3 Full Course Notes
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Document Summary

Outline: the derivation of the aggregate supply (as) curve, the adjustment mechanism of the as-ad model, consider the effect of a disturbance in the as-ad model and its implications on government policy. The ad curve indicates the equilibrium level of output on the demand side. The ad curve shows the combinations of y and p such that y = ae = c + i + g + x im. Any factor that affects autonomous expenditure other than y and p will shift the ad curve. www. notesolution. com (cid:222) (cid:222) (cid:222) Does it hold true for the economy as a whole: answer: probably not! Once again we are looking at the entire economy not just one industry, the big picture matters! the level of unemployment affects the slope of as curve. www. notesolution. com (cid:222) The as curve will be relatively flat (i. e. , elastic).

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Related Questions

Which of the following is correct?

a)the intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity of a single good.

b)The aggregate demand curve indicates a positive relationship between the price level and GDP.

c)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity.

d)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price level and the equilibrium level of real GDP.

e)Other things equal, a downward shift of the aggregate demand curve implies that the economy enters an expansionary phase.

 

Suppose that inflation is falling while the quantity demanded and output are rising. The economy is likely on a point on:

a. The aggregate demand curve above the short-run aggregate supply curve.

b. The aggregate demand curve below the short-run aggregate supply curve.

c. The short-run aggregate supply curve above the aggregate demand curve.

d. The short-run aggregate supply curve below the aggregate demand curve.

e. This situation is not possible.

Other things equal, what effect will each of the following have on the equilibrium price level and level of real output?

a. An increase in aggregate demand in the steep portion of the aggregate supply curve.

b. An increase in aggregate supply, with no change in aggregate demand (assume that prices and wages are flexible upward and downward).

c. Equal increase in aggregate demand and aggregate supply.

d. A reduction in aggregate demand in the relatively flat portion of the aggregate supply curve.

e. An increase in aggregate demand and a decrease in aggregate supply.