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BU204 - Unit 6 Seminar. Chapter 11: Income and Expenditure Chapter 12: Aggregate Demand and Aggregate Supply. Key Term Assignment. “Sticky” nominal wages Long Run Aggregate Supply Curve Marginal Propensity to Consume Multiplier Supply Shocks, both positive and negative
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BU204 - Unit 6 Seminar Chapter 11: Income and Expenditure Chapter 12: Aggregate Demand and Aggregate Supply
Key Term Assignment • “Sticky” nominal wages • Long Run Aggregate Supply Curve • Marginal Propensity to Consume • Multiplier • Supply Shocks, both positive and negative • Demand Shocks, both positive and negative
Chapter 10 • Multiplier • Consumption Function • Determinants of Investment Spending • Role of Investment • Income-Expenditure Equilibrium
Chapter 11 - Aggregate Demand & Aggregate Supply: • Aggregate Demand (AD) • Downward-sloping curve: • Wealth Effect and Interest Rate Effect • AD can shift if: • Changes in expectations, change in wealth, or change in the amount of physical capital. • OR, by Fiscal Policy or Monetary Policy.
Aggregate Supply (SRAS and LRAS): • Short-run aggregate supply • Reason for upward slope • SRAS will shift if: • Change in commodity prices, change in nominal wages, change in productivity. • Long-run aggregate supply • LRAS is vertical at potential output. • From the SR to the LR
AD-AS Model: • SR Equilibrium • Shifts in AD or AS • LR Equilibrium • Recessionary Gap • Inflationary Gap • Macroeconomic Policy: • Stabilization Policy
13. Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which each of the following economic events will move the economy from one long-run macroeconomic equilibrium to another. In each case, what are the short-run and long-run effects on the aggregate price level and aggregate output? • There is a decrease in households’ wealth due to a decline in the stock market. b. The government lowers taxes, leaving households with more disposable income, with no corresponding reduction in government purchases