1. The government imposes new regulations on car producers that require pollution devices on the tailpipes to cut pollution levels. 2. Positive business profit expectations affect investment. 3. A 50% increase in the value of stocks affects consumer spending. 4. The government will pick up all tuition expenses for private school students who have an “80 average” in economics. 5. Although the price level is constant, the Fed raises interest rates. 6. Government spending is affected by the closing of 50 military bases and decreasing Armed Forces personnel by 250,000 soldiers. 7. The dollar appreciates by 20% which affects the price of imported resources. 8. Congress cuts personal income taxes by 10% which affect consumer spending. 9. Investment is affected after factory inventories are being depleted in a hot [booming] economy. 10. Productivity (over a 6 month period) triples in the economy. 1. D 2. A 3. A 4. A 5. B 6. B 7. C 8. A 9. A 10. C THE AD /AS QUIZ A) AD B) AD D) AS C) AS
Transcript
1. The government imposes new regulations on car producers that require pollution devices on the tailpipes to cut pollution levels. 2. Positive business profit expectations affect investment. 3. A 50% increase in the value of stocks affects consumer spending. 4. The government will pick up all tuition expenses for private school students who have an “80 average” in economics. 5. Although the price level is constant, the Fed raises interest rates. 6. Government spending is affected by the closing of 50 military bases and decreasing Armed Forces personnel by 250,000 soldiers. 7. The dollar appreciates by 20% which affects the price of imported resources. 8. Congress cuts personal income taxes by 10% which affect consumer spending. 9. Investment is affected after factory inventories are being depleted in a hot [booming] economy. 10. Productivity (over a 6 month period) triples in the economy.
1. D 2. A 3. A 4. A 5. B 6. B 7. C 8. A 9. A 10. C
THE AD /AS QUIZA) AD B) AD D) ASC) AS
UNit 2.3
LET’S REVIEW!YOU KNOW WHAT?
Change in Consumer Spending
Change in government Spending
Change in investment Spending
Net EXport Spending
AD = C + I + G + X
shifters of aggregate demand
As = R + A + P
shifters of aggregate Supply
Change in resource prices
Change in productivity (technology)actions of the government
GDPR
P
AD
WHY IS THE AD CURVE DOWNWARD-SLOPING?
Think fast!
GDPR
P
AD
WHY IS THE AD CURVE DOWNWARD-SLOPING?
Think fast!
Effect #1 _____________________
Effect #2 ____________________
Effect #3 ____________________
THREE EFFECTS!
REAL BALANCES
FOREIGN TRADE
INTEREST RATE
GDPR
PSRAS
What’s the difference between SRAS and LRAS?
LRAS
QF
Think fast!
GDPR
PSRAS Wages _____________________
Real profits ________________ GDPr Output ________________
What’s the difference between SRAS and LRAS?
LRAS
QF
IN THE SHORT-RUN...
Think fast!
Wages _____________________ Real profits ________________ GDPr Output ________________ GDPr Output is ________________
