USC ECON 205 - Aggregate Demand and Aggregate Supply continued

This preview shows page 1 out of 2 pages.

View full document
Premium Document
Do you want full access? Go Premium and unlock all 2 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

ECON 205 1st Edition Lecture 18 Outline of Last Lecture - Continuation of chapter 20Outline of Current Lecture - Effects of a Shift in AD- Effects of a Shift in SRAS- John Maynard Keynes (1883-1946)Current LectureEffects of a Shift in AD- Event: Stock Market crasho C fallso AD shifts lefto Short-run equilibrium at Bo P and Y lower, unemployment highero Over time, PE falls, SRAS shifts right until LR equilibrium at C. Y and unemployment back at initial levels- 2 Large AD shifts: The Great Depression and WWII BoomEffects of a Shift in SRAS- Event: Oil Prices riseo Increases costso SRAS shifts lefto Short-run equilibrium point is B From A to B, stagflation (period of decline in output and increase in prices)- Accommodating an adverse shift:o Policy makers do nothing Low employment would cause wages to decrease and SRAS shifts right until Long-run equilibrium is at Ao Use fiscal or monetary policy to increase AD and accommodate the AS shift: Y back to YN, but P is permanently higherJohn Maynard Keynes (1883-1946)- The General Theory of Employment, Interest, and Money 1936- Argued recessions and depressions can result from inadequate demand; policymakers should shift AD- Famous critique of classical theory: The long run is a misleading guide to current affairs. In the long run, we are all dead. Economists set themselves too easy, too useless a task ifin tempestuous seasons they can only tell us when the storm is long past, the ocean will be flat.CHAPTER 21: The Influence of Monetary and Fiscal Policy on Aggregate DemandIntro- Long-run effects of fiscal policy on interest rates, investment, and economic growth- Long-run effects of monetary policy are on the price level and inflation rateAggregate Demand- AD curve slopes downward for 3 reasons: wealth effect, interest rate effect (most important), and exchange-rate effectTheory of liquidity preference- Money demand reflects how much wealth people want in cash (liquid form)- Household wealth

View Full Document
Download Aggregate Demand and Aggregate Supply continued
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...

Join to view Aggregate Demand and Aggregate Supply continued and access 3M+ class-specific study document.

We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Aggregate Demand and Aggregate Supply continued 2 2 and access 3M+ class-specific study document.


By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?