MGEA06H3 Study Guide - Final Guide: Market Liquidity, Mortgage Loan, Bundesautobahn 45

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Ata Mazaheri

Document Summary

The as-ad model in the long run & bringing money into the model. The effect of a change in wages in the ad-as model: so far we have not included wages in the ad-as model, we will discuss how wages affect the ad and as curves. Effect of a change in wage on ad: ad shows the combination of y and p such that ae = y, aggregate expenditure, ae is. Ae = c(y t + tr) + i(r) + g + x(e) im(e, y: wages do not enter the ae function, a change in wages would have no effect on ad. A rise in wages, for example, raises workers" income, but it also lowers shareholders" income (profit falls). Overall, there is no change in (total) real income no change in ae. (cid:222) (cid:222) Effect of a change in wage on as: changes in production costs such as wages and oil price will shift the (short-run) as curve.