ECON 101 Lecture Notes - Lecture 6: Aggregate Supply, Real Interest Rate, Longrun

25 views8 pages

violetprairie-dog514

15 Oct 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Anticipated changes are fully expected by economic participants: decision makers have time to adjust to them before they occur. The following factors will cause a shift in aggregate demand outward (inward): A decrease (increase) in the real interest rate. An increase in the optimism (pessimism) of businesses and consumers about future economic conditions. An increase (decline) in the expected rate of inflation. A reduction (increase) in the exchange rate value of the (cid:374)atio(cid:374)"s (cid:272)urre(cid:374)(cid:272)y. When considering shifts in aggregate supply, it is important to distinguish between the long run and short run. Shifts in sras: changes that temporarily alter the productive capability of an economy will shift the sras curve, but not the lras curve. Factors that increase (decrease) lras: increase (decrease) in the supply of resources, improvement (deterioration) in technology and productivity, institutional changes that increase (reduce) efficiency of resource use.

Related Questions

In response to a negative supply shock, the government decreases taxes. The most likely result of the government's tax decrease is:

	a decrease in unemployment and a decrease in the aggregate price level.
	a decrease in unemployment and an increase in the aggregate price level.
	an increase in unemployment and an increase in the aggregate price level.
	an increase in unemployment and a decrease in the aggregate price level.

If the aggregate price level rises, holding everything constant, consumers will:

	demand less aggregate output at all price levels resulting in a shift right of the AD curve.
	find their purchasing power has increased and will purchase more goods and services leading to an increase in the aggregate output demanded.
	need more money to purchase the same basket of goods which will lead to an increase in the demand for money leading to interest rate increases, and a reduction in the quantity of aggregate output demanded via a drop in investment demand.
	need less money to purchase the same basket of goods which will lead to a decrease in the demand for money leading to interest rate decreases, and an increase in the quantity of aggregate output demanded via an increase in investment demand.

rosecrow410

1. Discuss the difference between an increase in the aggregate demand curve and an increase in the quantity of real GDP demanded. Include a discussion of how the price level relates to each event.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. Describe the difference between a microeconomic demand curve and an aggregate demand curve.

4. The aggregate demand curve portrays the relationship between the price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

5. What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?

6. Shifts in the Aggregate Supply Curves

List and discuss the things that will make the Short Run Aggregate Supply curve shift to the left or to the right. Illustrate.

List and discuss the things that will make the Long Run Aggregate Supply curve shift to the left or to the right. Illustrate.

7. What is the natural level of output?

scarletraven382

The aggregate demand curve slopes downward indicating that:

a. an increase in the general price level will increase the aggregate quantity of goods and services demanded.

b. consumers substitute between domestic-made and foreign-made goods as their relative prices change.

c. a change in the interest rate will alter the aggregate quantity of goods and services demanded.

d. an increase in the general price level will reduce the aggregate quantity of goods and services demanded.

byzantiumbee293

ECON 101 Lecture Notes - Lecture 6: Aggregate Supply, Real Interest Rate, Longrun

Document Summary

Get access

Related Documents

ECON 101 Lecture Notes - Lecture 11: Aggregate Supply, Capital Formation, Longrun

ECON 101 Lecture Notes - Lecture 5: Foreign Exchange Market, Loanable Funds, Aggregate Demand

ECON 101 Lecture Notes - Lecture 12: Exchange Rate, Aggregate Supply, Aggregate Demand

Related Questions