ECO 2013 Lecture Notes - Lecture 18: Blood Type, Commodity Money, Aggregate Demand
Document Summary
13. 3 macroeconomic equilibrium in the long run and the short run. At long-run macroeconomic equilibrium , the ad and sras curves intersect at the. Automatic mechanism" since it occurs without any actions by the government. An alternative to waiting for this to happen is for the government to use. Recessions, expansions, and supply shocks monetary and fiscal policy: recession. Ad=y, so in a recession ad and y (are the same and both) fall. Short-run effect of a decline in ad. We will always get back to a, it"s natural! sweeny. Recession (lower prices, lower output, unemployment increases) B/c @b price level decreases, c, i, nx increase. ***consumption is 70% of gdp: expansion. Since ad= y, in an expansion both increase. Short-run effect of an increase in ad. Expansion (increase prices, increase output, lower unemployment) B/c @b, price level increases, c, i, nx decreases. If left alone it will more back to a sweeny: supply shock.
