1. Analysis of AD & AS Continued AP Macroeconomics

2. Where we came from… Previously, we learned the similarities and differences between the simple Keynesian model and the AD & AS model so that we could reconcile them with one another. Visual 3.11, Unit 3 Macroeconomics, National Council on Economic Education, http://apeconomics.ncee.net

3. Where are we going? Let’s review the factors that shift the Aggregate Demand curve:  Changes in consumption  Changes in investment  Changes in taxes  Changes in the money supply http://www.cooperativeindividualism.org/calvin-on-supply-and- demand.jpg

4. Where are we going? Let’s review the factors that shift the Aggregate Supply curve:  Changes in resource/commodity prices  Changes in technology  Changes in wage rates  Changes in labor productivity  Changes in expectations http://2.bp.blogspot.com/-hWakW2FAJs8/T3SI3ty43FI/AAAAAAAAAU8/HYUiH- X4B70/s1600/funny-cartoons-supply-and-demand.gif

5. What’s a shock? A supply or demand shock is caused by an event that shifts the curve.

6. Effects of a Supply Shock For supply, a supply shock is caused by a changes in commodity prices, nominal wages, or productivity. A negative supply shock raises production costs and lessens the quantity that producers are willing to produce at any given aggregate price level. This shifts the supply curve leftward. A positive supply shock reduces production costs and increases the quantity of goods supplied at any given aggregate price level. This shifts the supply curve to the right.

7. Effects of a Demand Shock Expectations of wealth, government spending, autonomous consumption – all things that shift demand. A positive demand shock shifts the demand curve to the right. It increases the quantity demanded at any given aggregate price level. A negative demand shock shifts the demand curve to the left, and decreases the quantity demanded at any given aggregate price level.

8. And now… Some resources: http://www.reffonomics.com/textbook2/macroec onomics2/keynesianthought/keynesiancross. swf

9. Works Cited Economics of Seinfeld. Demand. http://yadayadayadaecon.com/clip/46/ http://yadayadayadaecon.com/clip/46/ Krugman, Paul, and Robin Wells. Krugman’s Economics for AP. New York: Worth Publishers. Morton, John S. and Rae Jean B. Goodman. Advanced Placement Economics: Teacher Resource Manual. 3 rd ed. New York: National Council on Economic Education, 2003. Print. Reffonomics. www.reffonomics.com.www.reffonomics.com