ECO-2013 Lecture Notes - Lecture 7: Nominal Interest Rate, Real Interest Rate, Loanable Funds
Document Summary
Chapter 9: an introduction to basic macroeconomic markets. Aggregate supply of goods and services: what is aggregate supply (as), the summation of all goods and services offered for sale, as is the relationship between two variables: amount of goods offered for sale and the price level. In the short run, many resource prices are xed: an increase in the price level increases pro ts so rms are willing to make more goods. Lras is the economy"s full employment rate of output: lras = potential gdp, the natural rate of unemployment occurs at lras. Since we have sras and lras, we will have short run equilibrium and long run equilibrium which can be different equilibrium points. Output (gdp) (1) gdp is falling, unemployment is increasing. Actual gdp is less than potential gdp. Actual unemployment is greater than the natural rate of unemployment (3) gdp is increasing, unemployment is falling. Actual gdp is greater than potential gdp.