1. Module Economic Growth in Macroeconomic Models KRUGMAN'S MACROECONOMICS for AP* 40 Margaret Ray and David Anderson

2. What you will learn in this Module : How long-run economic growth is represented in macroeconomic models How to model the effects of economic growth policies

3. Long-run Economic Growth and the Production Possibilities Curve K’K C’ C Watch the slide animation. 1.What do points A, C and K represent? 2.What do points B, C’ and K’ represent? 3.What would have caused the shift to PPC’? LR growth is a shift outward of the PPC. SR fluctuation is a movement along PPC.

4. Long-run Economic Growth and the Aggregate Demand-Aggregate Supply Model Watch the slide animation. 1. What would shift LRAS to LRAS’?

5. Distinguishing Between Long-run Growth and Short-run Fluctuations Watch the slide animation. Answer the following questions. 1.What part of the business cycle are we in? How does the graph show this? 2.What happens to P and Y as we move towards Yf? 3.Where do P and Yf end up? 4.What part of the business cycle are we in? How does the graph show this? 5.What happens to P and Y as we move towards Yf? 6.Where do P and Yf end up?

6. Distinguishing Between Long-run Growth and Short-run Fluctuations