ECON 1110 Lecture Notes - Lecture 10: Aggregate Supply, Demand Curve, Aggregate Demand

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Chapter 23: output and prices in the short run. So far, we have assumed that prices are constant. Increase in price level: decrease in real value of money, decrease in wealth, increase in imports, decrease in exports, decrease in aggregate expenditures. A curve showing combinations of real gdp and the price level that make desired expenditure (ae) equal to national income (y) The ad curve is not the demand curve we have seen in microeconomics. Downward sloping: increase in price = decrease in wealth = decrease in consumption = decrease in national income, increase in price = increase in imports = decrease in net exports = decrease in national income. Shifts of the ad curve are called aggregate demand shocks . The simple multiplier measures the horizontal shift in the aggregate demand curve in response to a change in autonomous desired expenditure. Assume: increase in c0, i0, g0, or x0 and price is fixed at p0.

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