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II. UNIT II.. C. Aggregate De mand and Aggregate Supply 1. Equilibrium real GDP and price level with stationary AD and AS 2. The depiction of cyclical.

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Presentation on theme: "II. UNIT II.. C. Aggregate De mand and Aggregate Supply 1. Equilibrium real GDP and price level with stationary AD and AS 2. The depiction of cyclical."— Presentation transcript:

1 II. UNIT II.. C. Aggregate De mand and Aggregate Supply 1. Equilibrium real GDP and price level with stationary AD and AS 2. The depiction of cyclical unemployment, demand-pull Inflation, and supply-side inflation 3. Aggregate demand stabilization policies

2 EQUILIBRIUM REAL GDP AND PRICE LEVEL SHORT RUN

3 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL

4 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL WHAT'S TRUE IN EQUILIBRIUM?

5 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL WHAT'S TRUE IN EQUILIBRIUM? PRICE LEVEL WHERE AGGREGATE QUANTITY SUPPLIED EQUALS AGGREGATE QUANTITY DEMANDED

6 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL WHAT'S TRUE IN EQUILIBRIUM? PRICE LEVEL WHERE AGGREGATE QUANTITY SUPPLIED EQUALS AGGREGATE QUANTITY DEMANDED WE WILL END UP THERE

7 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL NOTHING INHERENTLY GOOD OR BAD ABOUT THE EQUILIBRIUM IT'S SIMPLY WHERE WE WILL END UP

8 PRICE LEVEL REAL GDP AD

9 PRICE LEVEL REAL GDP AD AGGREGATE

10 PRICE LEVEL REAL GDP AS

11 PRICE LEVEL REAL GDP AS AGGREGATE

12 PRICE LEVEL REAL GDP AS

13 FIRST FIVE DETERMINE PRODUCTION COSTS PRODUCTION COST UP----SUPPLY DECREASES, ETC. 1. resource prices 2. technology and/or productivity 3. taxes and subsidies 4. price of other goods (particularly price of production alternatives) 5. expectations (sellers' expectations about future prices) ************************ 6. number of sellers DETERMINANTS OF SUPPLY

14 PRICE LEVEL REAL GDP AS

15 PRICE LEVEL REAL GDP AS PRODUCTION COSTS UP

16 PRICE LEVEL REAL GDP AS

17 PRICE LEVEL REAL GDP AS

18 PRICE LEVEL REAL GDP AS PRODUCTION COSTS DOWN

19 PRICE LEVEL REAL GDP AS

20 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL

21 PRICE LEVEL REAL GDP EQ. GDP AS AD EQ. PRICE LEVEL

22 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL

23 PRICE LEVEL REAL GDP AS AD EQ. PRICE LEVEL EQ. REAL GDP

24 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL

25 PRICE LEVEL REAL GDP AS AD PRICE LEVEL

26 PRICE LEVEL REAL GDP AS AD PRICE LEVEL GDP PRODUCED GDP DEMANDED

27 PRICE LEVEL REAL GDP AS AD EQ. GDP EQ. PRICE LEVEL

28 PRICE LEVEL REAL GDP AS AD PRICE LEVEL GDP DEMANDED GDP PRODUCED


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