MGEA05H3 Lecture Notes - Lecture 9: Price Level, Aggregate Supply, Aggregate Demand
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Lecture 09 aggregate demand and aggregate supply. Planned(p): when ae0 goes down, ad shifts to the right, when ae0 goes down, ad shifts to the left. Aggregate supply: the aggregate supply (as) curve represents the quantity of output that producers are willing to supply at each aggregate price level. The long-run aggregate supply curve (the sras curve: change in the aggregate price level does not affect the quantity of aggregate supplied in the long run (prices /wages will be flexible) As-ad model: the ad curve is downward sloping. Sras: the long-run equilibrium refers to the situation in which the short-run equilibrium is on the lras curve. If ysr != yfe, then the economy has an output gap. Fiscal policy the government"s choice regarding levels of spending, taxes, and transfer payments: monetary policy the central bank"s choice regarding the level of money supply.