Chap12 part 1_

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12.1 Aggregate Demand Curve 12.2 Aggregate Supply Curve CHAPTER OUTLINE

12.1 AGGREGATE DEMAND CURVE ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Shift in AD curve

12.1 AGGREGATE DEMAND CURVE ,[object Object],[object Object],How to derive it?

0 Real GDP (trillions of RM) 0 140 Aggregate expenditure (trillions of dollars ) Real GDP (trillions of RM) 45° (a) Income-expenditure model (b) Aggregate demand curve ,[object Object],[object Object],Price level Deriving AD Curve e AE ( P = 130) e 130 12.0 12.0

0 Real GDP (trillions of RM) Aggregate expenditure (trillions of dollars) AE' (P = 140) e' 11.5 AE (P = 130) e 12.0 AE" (P = 120) e" 12.5 45° ,[object Object],[object Object],[object Object],[object Object],(a) Income-expenditure model 0 140 AD e' 11.5 e 130 12.0 Real GDP (trillions of RM) 120 e" 12.5 Price level ( b) Aggregate demand curve

12.1 AGGREGATE DEMAND CURVE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Aggregate Output Price Level 0 Aggregate demand P Y Y 2 P 2 1. A decrease in the price level . . . 2. . . . increases the quantity of goods and services demanded.

0 P 1 Y 1 Aggregate Output Price Level Aggregate demand, D 1 D 2 Y 2

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Any changes in autonomous component of AE Factors That Shift the Aggregate Demand Curve (Government Policy) Expansionary monetary policy M s AD curve shifts to the right Contractionary monetary policy M s AD curve shifts to the left Expansionary fiscal policy G AD curve shifts to the right Contractionary fiscal policy G AD curve shifts to the left T AD curve shifts to the right T AD curve shifts to the left

12.2 AGGREGATE SUPPLY CURVE ,[object Object],[object Object],[object Object],[object Object]

Aggregate Output Price Level 0 Short-run aggregate supply 1. A decrease in the price level . . . 2. . . . reduces the quantity of goods and services supplied in the short run. Y P Y 2 P 2

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Aggregate Output Price Level 0 Aggregate demand 3. . . . and the price level to rise. 2. . . . causes output to fall . . . 1. An adverse shift in the short- run aggregate-supply curve . . . Short-run aggregate supply, AS Y A P AS 2 B Y 2 P 2

Chap12 part 1_

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