Intermediate macroeconomics Lecture 7
Intermediate Macroeconomics Lecture 7
How the sr and lr differ a In the Lr, prices are flexible and can respond to changes in S or D. In the sr many prices are stuck at some predetermined level a In the Sr, monetary policy does have a potent effect on output and employment
How the SR and LR Differ ◼ In the LR, prices are flexible and can respond to changes in S or D. In the SR, many prices are stuck at some predetermined level. ◼ In the SR, monetary policy does have a potent effect on output and employment!
Aggregate Demand 以=Y y=y AD(M个 AD 5085100170 a Shifts in the AD curve ---change in money suppl
Aggregate Demand ◼ Shifts in the AD curve --- change in money supply MV PY = M 1 Y kY P V = = P Y AD 1 100 170 2 50 85 AD’ (M )
Aggregate Supply ■LRv.s.SR P LRAS SRAS
Aggregate Supply ◼ LR v.s. SR P Y P Y LRAS SRAS
Shocks to aD ■ Introduction of atm MV= PY LRAS B SRAS A Y Y
Shocks to AD ◼ Introduction of ATM P Y LRAS SRAS Y − A B C MV PY =