ECON 104 Lecture Notes - Lecture 13: Aggregate Demand, Money Supply
19 Sep 2016
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Document Summary
We have looked at determinants of prosperity in the long run: productivity, investment, trade. We have looked at the determinant of absolute prices in the long run: money supply. Ppp, classical dichotomy don"t hold in the short run. Growth rate of real gdp is generally used to determine if we"re in a recession, and as a thermometer of the economy. Gdp, personal income, profits, consumer spending, investment spending, industrial production, Retail sales, home sales, auto sales, stock indexes, etc. Some lead , some lag , some (investment in particular) are more volatile than others. How the short run differs from the long run. Classical dicohotomy: nominal variables, real variables are separate. Monetary neutrality: money affects nominal variables, but not real variables. Short run: aggregate demand and aggregate supply reign. Aggregate demand curve shows the relationship between the price level and the quantity of goods and services desired by households, firms, and government. c)
