SlideShare a Scribd company logo

Agrregate Demand and Supply

•Download as PPT, PDF•
•
Aleeza Baig
Aleeza Baig
TechnologyEconomy & Finance
1 of 69
Aggregate Demand and Aggregate Supply Chapter 31
Short-Run Economic Fluctuations ,[object Object],[object Object],[object Object],[object Object]
Short-Run Economic Fluctuations ,[object Object],[object Object]
Three Key Facts About Economic Fluctuations ,[object Object],[object Object],[object Object],[object Object]
(a) Real GDP 1965 1970 1975 1980 1985 1990 1995 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 $7,000 A Look At Short-Run Economic Fluctuations Recessions Billions of 1992 Dollars Real GDP
Three Key Facts About Economic Fluctuations ,[object Object],[object Object],[object Object]
(b) Investment Spending Billions of 1992 Dollars 300 400 500 600 700 800 900 1,000 $1,100 1965 1970 1975 1980 1985 1990 1995 A Look At Short-Run Economic Fluctuations Recessions Investment spending
Three Key Facts About Economic Fluctuations ,[object Object],[object Object],[object Object]
(c) Unemployment Rate 0 2 4 6 8 10 12 1965 1970 1975 1980 1985 1990 1995 A Look At Short-Run Economic Fluctuations Recessions Unemployment rate Percent of Labor Force
How the Short Run Differs From the Long Run ,[object Object],[object Object],[object Object]
The Basic Model of Economic Fluctuations ,[object Object],[object Object],[object Object]
The Basic Model of Economic Fluctuations Economist use the model of aggregate demand and aggregate supply to explain short-run fluctuations in economic activity around its long-run trend.
The Basic Model of Economic Fluctuations ,[object Object]
The Basic Model of Economic Fluctuations ,[object Object]
Aggregate Demand and Aggregate Supply... 0 Equilibrium output Quantity of Output Price Level Equilibrium price level Aggregate supply Aggregate demand
The Aggregate Demand Curve ,[object Object],[object Object]
The Aggregate-Demand Curve... 0 Quantity of Output Price Level Aggregate demand P 1 Y 1 Y 2 P 2 2. …increases the quantity of goods and services demanded. 1. A decrease in the price level...
Why the Aggregate Demand Curve Is Downward Sloping ,[object Object],[object Object],[object Object]
The Price Level and Consumption: The Wealth Effect ,[object Object],[object Object]
The Price Level and Investment: The Interest Rate Effect ,[object Object],[object Object]
The Price Level and net Exports: The Exchange-Rate Effect ,[object Object],[object Object]
Why the Aggregate Demand Curve Might Shift ,[object Object],[object Object],[object Object]
Why the Aggregate Demand Curve Might Shift ,[object Object],[object Object],[object Object],[object Object]
Shifts in the Aggregate Demand Curve... 0 P 1 Y 1 Quantity of Output Price Level Aggregate demand, D 1 D 2 Y 2
The Aggregate Supply Curve ,[object Object],[object Object]
The Long-Run Aggregate Supply Curve ,[object Object],[object Object]
The Long-Run Aggregate- Supply Curve... Price Level 0 Quantity of Output Natural rate of output Long-run aggregate supply P 1 P 2 2. …does not affect the quantity of goods and services supplied in the long run. 1. A change in the price level…
The Long-Run Aggregate Supply Curve ,[object Object],[object Object]
Why the Long-Run Aggregate Supply Curve Might Shift ,[object Object],[object Object]
Why the Long-Run Aggregate Supply Curve Might Shift ,[object Object],[object Object],[object Object],[object Object]
Long-Run Growth and Inflation... Price Level 0 P 1980 Y 1980 AD 1980 LRAS 1980 1. In the long-run, technological progress shifts long-run aggregate supply... LRAS 2000 LRAS 1990 Quantity of Output P 2000 P 1990 2. …and growth in the money supply shifts aggregate-demand... AD 2000 AD 1990 4. …and ongoing inflation. Y 1990 Y 2000 3. …leading to growth in output...
Long-Run Growth and Inflation Short-run fluctuations in output and price level should be viewed as deviations from the continuing long-run trends.
Why the Short-Run Aggregate Supply Curve Slopes Upward in the Short Run ,[object Object],[object Object]
The Short-Run Aggregate Supply Curve... Price Level 0 Quantity of Output Short-run aggregate supply Y 1 P 1 Y 2 2. reduces the quantity of goods and services supplied in the short run. P 2 1. A decrease in the price level
Why the Short-Run Aggregate Supply Curve Slopes Upward in the Short Run ,[object Object],[object Object],[object Object]
The Misperceptions Theory ,[object Object],[object Object],[object Object]
The Sticky-Wage Theory ,[object Object],[object Object],[object Object],[object Object]
The Sticky-Price Theory ,[object Object],[object Object],[object Object],[object Object]
Why the Aggregate Supply Curve Might Shift ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],Why the Aggregate Supply Curve Might Shift
The Long-Run Equilibrium Quantity of Output Price Level 0 Short-run aggregate supply Long-run aggregate supply Aggregate demand A Equilibrium price Natural rate of output
A Contraction in Aggregate Demand... Price Level 0 A P 1 Y 1 Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 1. A decrease in aggregate demand… AD 2 Quantity of Output Short-run aggregate supply, AS 1 Long-run aggregate supply Aggregate demand, AD 1 B P 2 Y 2 2. …causes output to fall in the short run… AS 2 C P 3 3. …but over time, the short-run aggregate-supply curve shifts… 4. …and output returns to its natural rate.
Shifts in Aggregate Demand ,[object Object],[object Object]
An Adverse Shift in Aggregate Supply ,[object Object],[object Object],[object Object],[object Object]
An Adverse Shift in Aggregate Supply... Long-run aggregate supply Short-run aggregate supply, AS 1 0 Aggregate demand A Y 1 P 1 1. An adverse shift in the short-run aggregate-supply curve… AS 2 Quantity of Output Price Level 3. …and the price level to rise. P 2 2. …causes output to fall… B Y 2
Stagflation ,[object Object],[object Object],[object Object]
Policy Responses to Recession ,[object Object],[object Object],[object Object]
Accommodating an Adverse Shift in Aggregate Supply... 0 Short-run aggregate supply, AS 1 Aggregate demand, AD 1 Long-run aggregate supply A P 1 AS 2 1. When short-run aggregate supply falls… Quantity of Output Natural rate of output Price Level P 2 P 3 3....which causes the price level to rise 4. …but keeps output at its natural rate. C 2. …policymakers can accommodate the shift by expanding aggregate demand… AD 2
The Effects of a Shift in Aggregate Supply ,[object Object],[object Object]
Summary & Graphical Review
A Look At Short-Run Economic Fluctuations Recessions (a) Real GDP Billions of 1992 Dollars 1965 1970 1975 1980 1985 1990 1995 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 $7,000 Real GDP
A Look At Short-Run Economic Fluctuations Recessions (b) Investment Spending Billions of 1992 Dollars 300 400 500 600 700 800 900 1,000 $1,100 Investment spending 1965 1970 1975 1980 1985 1990 1995
A Look At Short-Run Economic Fluctuations Recessions (c) Unemployment Rate Unemployment rate 0 2 4 6 8 10 12 1965 1970 1975 1980 1985 1990 1995 Percent of Labor Force
Aggregate Demand and Aggregate Supply... Equilibrium output Quantity of Output Price Level 0 Equilibrium price level Aggregate supply Aggregate demand
The Aggregate-Demand Curve... Quantity of Output Price Level 0 Aggregate demand P 1 Y 1 Y 2 P 2 2. …increases the quantity of goods and services demanded. 1. A decrease in the price level...
Shifts in the Aggregate Demand Curve... Quantity of Output Price Level 0 Aggregate demand, D 1 P 1 Y 1 D 2 Y 2
The Long-Run Aggregate- Supply Curve... Quantity of Output Natural rate of output Price Level 0 Long-run aggregate supply P 1 P 2 2. …does not affect the quantity of goods and services supplied in the long run. 1. A change in the price level…
Long-Run Growth and Inflation... 1. In the long-run, technological progress shifts long-run aggregate supply... LRAS 2000 LRAS 1990 Quantity of Output Price Level 0 P 1980 Y 1980 AD 1980 P 2000 P 1990 LRAS 1980 2. …and growth in the money supply shifts aggregate-demand... AD 2000 AD 1990 4. …and ongoing inflation. Y 1990 Y 2000 3. …leading to growth in output...
The Short-Run Aggregate Supply Curve... Quantity of Output Price Level 0 Short-run aggregate supply Y 1 P 1 Y 2 2. reduces the quantity of goods and services supplied in the short run. P 2 1. A decrease in the price level
The Long-Run Equilibrium Quantity of Output Price Level 0 Short-run aggregate supply Long-run aggregate supply Aggregate demand A Equilibrium price Natural rate of output
A Contraction in Aggregate Demand... Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 1. A decrease in aggregate demand… AD 2 Quantity of Output Price Level 0 Short-run aggregate supply, AS 1 Long-run aggregate supply Aggregate demand, AD 1 A P 1 Y 1 B P 2 Y 2 2. …causes output to fall in the short run… AS 2 C P 3 3. …but over time, the short-run aggregate-supply curve shifts… 4. …and output returns to its natural rate.
An Adverse Shift in Aggregate Supply... 1. An adverse shift in the short-run aggregate-supply curve… AS 2 Long-run aggregate supply Short-run aggregate supply, AS 1 Quantity of Output Price Level 0 Aggregate demand A Y 1 P 1 3. …and the price level to rise. P 2 2. …causes output to fall… B Y 2
Accommodating an Adverse Shift in Aggregate Supply... AS 2 1. When short-run aggregate supply falls… Quantity of Output Natural rate of output Price Level 0 Short-run aggregate supply, AS 1 Aggregate demand, AD 1 Long-run aggregate supply A P 1 P 2 P 3 3....which causes the price level to rise 4. …but keeps output at its natural rate. C 2. …policymakers can accommodate the shift by expanding aggregate demand… AD 2
Summary ,[object Object],[object Object],[object Object]
Summary ,[object Object],[object Object]
Summary ,[object Object],[object Object]
Summary ,[object Object],[object Object],[object Object]
Summary ,[object Object],[object Object],[object Object]
Summary ,[object Object],[object Object]

Recommended

Phillips Curve, Inflation & Interest Rate
Phillips Curve, Inflation & Interest RatePhillips Curve, Inflation & Interest Rate
Phillips Curve, Inflation & Interest RateZeeshan Ali
 
Aggregate supply
Aggregate supplyAggregate supply
Aggregate supplyUmair Aslam
 
aggregate demand and aggregate supply for 2nd semester for BBA
aggregate demand and aggregate supply for 2nd semester for BBAaggregate demand and aggregate supply for 2nd semester for BBA
aggregate demand and aggregate supply for 2nd semester for BBAginish9841502661
 
Inflation types and causes
Inflation types and causesInflation types and causes
Inflation types and causesQuaid e Azam college of commerce (university of peshawar)
 
Chap5(the open economy)
Chap5(the open economy)Chap5(the open economy)
Chap5(the open economy)Cambodian Mekong University
 
Aggregate Demand (AD)
Aggregate Demand (AD)Aggregate Demand (AD)
Aggregate Demand (AD)tutor2u
 
Inflation
InflationInflation
InflationSaravanan Sivamani
 
4. short run economic fluctuations
4. short run economic fluctuations4. short run economic fluctuations
4. short run economic fluctuationsGhanshyam Gupta
 

Recommended

Phillips Curve, Inflation & Interest Rate
Phillips Curve, Inflation & Interest RatePhillips Curve, Inflation & Interest Rate
Phillips Curve, Inflation & Interest RateZeeshan Ali
 
Aggregate supply
Aggregate supplyAggregate supply
Aggregate supplyUmair Aslam
 
aggregate demand and aggregate supply for 2nd semester for BBA
aggregate demand and aggregate supply for 2nd semester for BBAaggregate demand and aggregate supply for 2nd semester for BBA
aggregate demand and aggregate supply for 2nd semester for BBAginish9841502661
 
Inflation types and causes
Inflation types and causesInflation types and causes
Inflation types and causesQuaid e Azam college of commerce (university of peshawar)
 
Chap5(the open economy)
Chap5(the open economy)Chap5(the open economy)
Chap5(the open economy)Cambodian Mekong University
 
Aggregate Demand (AD)
Aggregate Demand (AD)Aggregate Demand (AD)
Aggregate Demand (AD)tutor2u
 
Inflation
InflationInflation
InflationSaravanan Sivamani
 
4. short run economic fluctuations
4. short run economic fluctuations4. short run economic fluctuations
4. short run economic fluctuationsGhanshyam Gupta
 
Inflation and unemployment
Inflation and unemploymentInflation and unemployment
Inflation and unemploymentNaveen Sihag
 
Permanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income HypothesisPermanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income HypothesisJosephAsafo1
 
MACROECONOMICS-CH15
MACROECONOMICS-CH15MACROECONOMICS-CH15
MACROECONOMICS-CH15kkjjkevin03
 
Lec 14 Market Equilibrium
Lec 14 Market EquilibriumLec 14 Market Equilibrium
Lec 14 Market EquilibriumAtta Hussain Syed
 
Demand pull inflation
Demand pull inflationDemand pull inflation
Demand pull inflationRasel Ahamed
 
Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyChris Thomas
 
Philips curve
Philips curvePhilips curve
Philips curveDivya Jain
 
Aggregate demand and supply
Aggregate demand and supplyAggregate demand and supply
Aggregate demand and supplyDr Siddiqui
 
Philip's Curve
Philip's CurvePhilip's Curve
Philip's CurvePrithvi Ghag
 
IS-LM Analysis
IS-LM AnalysisIS-LM Analysis
IS-LM AnalysisHigher Education Department, Haryana
 
Inflation
InflationInflation
InflationPrâchï Čhõûrašia
 
A2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of PaymentsA2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of Paymentstutor2u
 
Open-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic ConceptsOpen-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic ConceptsChris Thomas
 
Real vs. Nominal GDP
Real vs. Nominal GDPReal vs. Nominal GDP
Real vs. Nominal GDPbrianbelen
 
Presentation inflation
Presentation inflationPresentation inflation
Presentation inflationsuvarnapstpl
 
MACROECONOMICS-CH4
MACROECONOMICS-CH4MACROECONOMICS-CH4
MACROECONOMICS-CH4kkjjkevin03
 
Macro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLYMacro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLYZegeye Paulos
 
Inflation
InflationInflation
Inflationanant agarwal
 
Supply Side Policies
Supply Side PoliciesSupply Side Policies
Supply Side PoliciesAquinas College Economics Department
 
Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...Farhana Afroj
 
33
3333
33Max Scott
 
CH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.pptCH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.pptErgin Akalpler
 

More Related Content

What's hot

Inflation and unemployment
Inflation and unemploymentInflation and unemployment
Inflation and unemploymentNaveen Sihag
 
Permanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income HypothesisPermanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income HypothesisJosephAsafo1
 
MACROECONOMICS-CH15
MACROECONOMICS-CH15MACROECONOMICS-CH15
MACROECONOMICS-CH15kkjjkevin03
 
Demand pull inflation
Demand pull inflationDemand pull inflation
Demand pull inflationRasel Ahamed
 
Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyChris Thomas
 
Aggregate demand and supply
Aggregate demand and supplyAggregate demand and supply
Aggregate demand and supplyDr Siddiqui
 
A2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of PaymentsA2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of Paymentstutor2u
 
Open-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic ConceptsOpen-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic ConceptsChris Thomas
 
Real vs. Nominal GDP
Real vs. Nominal GDPReal vs. Nominal GDP
Real vs. Nominal GDPbrianbelen
 
Presentation inflation
Presentation inflationPresentation inflation
Presentation inflationsuvarnapstpl
 
MACROECONOMICS-CH4
MACROECONOMICS-CH4MACROECONOMICS-CH4
MACROECONOMICS-CH4kkjjkevin03
 
Macro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLYMacro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLYZegeye Paulos
 
Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...Farhana Afroj
 

What's hot (20)

Inflation and unemployment
Inflation and unemploymentInflation and unemployment
Inflation and unemployment
 
Permanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income HypothesisPermanent and Life Cycle Income Hypothesis
Permanent and Life Cycle Income Hypothesis
 
MACROECONOMICS-CH15
MACROECONOMICS-CH15MACROECONOMICS-CH15
MACROECONOMICS-CH15
 
Lec 14 Market Equilibrium
Lec 14 Market EquilibriumLec 14 Market Equilibrium
Lec 14 Market Equilibrium
 
Demand pull inflation
Demand pull inflationDemand pull inflation
Demand pull inflation
 
Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply
 
Philips curve
Philips curvePhilips curve
Philips curve
 
Aggregate demand and supply
Aggregate demand and supplyAggregate demand and supply
Aggregate demand and supply
 
Philip's Curve
Philip's CurvePhilip's Curve
Philip's Curve
 
IS-LM Analysis
IS-LM AnalysisIS-LM Analysis
IS-LM Analysis
 
Inflation
InflationInflation
Inflation
 
A2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of PaymentsA2 Macroeconomics - Revision on the Balance of Payments
A2 Macroeconomics - Revision on the Balance of Payments
 
Open-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic ConceptsOpen-Economy Macroeconomics: Basic Concepts
Open-Economy Macroeconomics: Basic Concepts
 
Real vs. Nominal GDP
Real vs. Nominal GDPReal vs. Nominal GDP
Real vs. Nominal GDP
 
Presentation inflation
Presentation inflationPresentation inflation
Presentation inflation
 
MACROECONOMICS-CH4
MACROECONOMICS-CH4MACROECONOMICS-CH4
MACROECONOMICS-CH4
 
Macro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLYMacro Economics -II Chapter Two AGGREGATE SUPPLY
Macro Economics -II Chapter Two AGGREGATE SUPPLY
 
Inflation
InflationInflation
Inflation
 
Supply Side Policies
Supply Side PoliciesSupply Side Policies
Supply Side Policies
 
Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...Balance of Payment, Exchange rate Determination, Internal and External Equili...
Balance of Payment, Exchange rate Determination, Internal and External Equili...
 

Similar to Agrregate Demand and Supply

CH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.pptCH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.pptErgin Akalpler
 
Monetary and fiscal policy ppt @ becdoms
Monetary and fiscal policy ppt @ becdomsMonetary and fiscal policy ppt @ becdoms
Monetary and fiscal policy ppt @ becdomsBabasab Patil
 
20120826 mankiw economics chapter33
20120826 mankiw economics chapter3320120826 mankiw economics chapter33
20120826 mankiw economics chapter33FED事務局
 
Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyTuul Tuul
 
Chap12 part 1_
Chap12 part 1_Chap12 part 1_
Chap12 part 1_Shu Shin
 
Chap12 part 1_
Chap12 part 1_Chap12 part 1_
Chap12 part 1_Shu Shin
 
3.3 Macro Economic Models
3.3 Macro Economic Models3.3 Macro Economic Models
3.3 Macro Economic ModelsAndrew McCarthy
 
aggregate-demand-and-aggregate-supply.pdf
aggregate-demand-and-aggregate-supply.pdfaggregate-demand-and-aggregate-supply.pdf
aggregate-demand-and-aggregate-supply.pdfmalviyatushar108
 
aggregate-demand-and-aggregate-supply.pptx
aggregate-demand-and-aggregate-supply.pptxaggregate-demand-and-aggregate-supply.pptx
aggregate-demand-and-aggregate-supply.pptxnoufal51
 
AGGREGATE DEMAND AND AGGREGATE SUPPLY
AGGREGATE DEMAND AND AGGREGATE SUPPLYAGGREGATE DEMAND AND AGGREGATE SUPPLY
AGGREGATE DEMAND AND AGGREGATE SUPPLYJeff Brooks
 
Aggregate Supply / Aggregate Demand Model
Aggregate Supply / Aggregate Demand ModelAggregate Supply / Aggregate Demand Model
Aggregate Supply / Aggregate Demand ModelKaysee Das
 
Unit two m odule 2 topic one inflation
Unit two m odule 2 topic one inflationUnit two m odule 2 topic one inflation
Unit two m odule 2 topic one inflationLiam Nabbal
 
Chap010 4 (2010)
Chap010 4 (2010)Chap010 4 (2010)
Chap010 4 (2010)bnorman2
 
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20model
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20modelGenuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20model
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20modelDaniseck Adam
 

Similar to Agrregate Demand and Supply (20)

33
3333
33
 
CH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.pptCH 1.1 Aggregate Demand & Aggregate Supply.ppt
CH 1.1 Aggregate Demand & Aggregate Supply.ppt
 
CH 1.1 AD & AS.ppt
CH 1.1 AD & AS.pptCH 1.1 AD & AS.ppt
CH 1.1 AD & AS.ppt
 
Monetary and fiscal policy ppt @ becdoms
Monetary and fiscal policy ppt @ becdomsMonetary and fiscal policy ppt @ becdoms
Monetary and fiscal policy ppt @ becdoms
 
ad&as.pptx
ad&as.pptxad&as.pptx
ad&as.pptx
 
20120826 mankiw economics chapter33
20120826 mankiw economics chapter3320120826 mankiw economics chapter33
20120826 mankiw economics chapter33
 
Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate SupplyAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply
 
Chap12 part 1_
Chap12 part 1_Chap12 part 1_
Chap12 part 1_
 
Chap12 part 1_
Chap12 part 1_Chap12 part 1_
Chap12 part 1_
 
3.3 Macro Economic Models
3.3 Macro Economic Models3.3 Macro Economic Models
3.3 Macro Economic Models
 
aggregate-demand-and-aggregate-supply.pdf
aggregate-demand-and-aggregate-supply.pdfaggregate-demand-and-aggregate-supply.pdf
aggregate-demand-and-aggregate-supply.pdf
 
aggregate-demand-and-aggregate-supply.pptx
aggregate-demand-and-aggregate-supply.pptxaggregate-demand-and-aggregate-supply.pptx
aggregate-demand-and-aggregate-supply.pptx
 
AGGREGATE DEMAND AND AGGREGATE SUPPLY
AGGREGATE DEMAND AND AGGREGATE SUPPLYAGGREGATE DEMAND AND AGGREGATE SUPPLY
AGGREGATE DEMAND AND AGGREGATE SUPPLY
 
Aggregate Supply / Aggregate Demand Model
Aggregate Supply / Aggregate Demand ModelAggregate Supply / Aggregate Demand Model
Aggregate Supply / Aggregate Demand Model
 
12 aggregate demand
12 aggregate demand12 aggregate demand
12 aggregate demand
 
Module 45 putting it all together
Module 45 putting it all togetherModule 45 putting it all together
Module 45 putting it all together
 
Unit two m odule 2 topic one inflation
Unit two m odule 2 topic one inflationUnit two m odule 2 topic one inflation
Unit two m odule 2 topic one inflation
 
Macro Economics
Macro EconomicsMacro Economics
Macro Economics
 
Chap010 4 (2010)
Chap010 4 (2010)Chap010 4 (2010)
Chap010 4 (2010)
 
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20model
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20modelGenuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20model
Genuine%20 %2005%20-%20 general%20equilibrium%20and%20ad-as%20model
 

More from Aleeza Baig

Monetary Systems
Monetary SystemsMonetary Systems
Monetary SystemsAleeza Baig
 
Assesment Of Human Resource Development Needs
Assesment Of Human Resource Development NeedsAssesment Of Human Resource Development Needs
Assesment Of Human Resource Development NeedsAleeza Baig
 
Theory Of Open Economy
Theory Of Open EconomyTheory Of Open Economy
Theory Of Open EconomyAleeza Baig
 
Management Development
Management DevelopmentManagement Development
Management DevelopmentAleeza Baig
 
Human Resource Development In A Cultrually Diverse Environment
Human Resource Development In A Cultrually Diverse EnvironmentHuman Resource Development In A Cultrually Diverse Environment
Human Resource Development In A Cultrually Diverse EnvironmentAleeza Baig
 
Organizational Environment
Organizational EnvironmentOrganizational Environment
Organizational EnvironmentAleeza Baig
 
Intro to Management
Intro to ManagementIntro to Management
Intro to ManagementAleeza Baig
 

More from Aleeza Baig (8)

Monetary Systems
Monetary SystemsMonetary Systems
Monetary Systems
 
Assesment Of Human Resource Development Needs
Assesment Of Human Resource Development NeedsAssesment Of Human Resource Development Needs
Assesment Of Human Resource Development Needs
 
Theory Of Open Economy
Theory Of Open EconomyTheory Of Open Economy
Theory Of Open Economy
 
Management Development
Management DevelopmentManagement Development
Management Development
 
Human Resource Development In A Cultrually Diverse Environment
Human Resource Development In A Cultrually Diverse EnvironmentHuman Resource Development In A Cultrually Diverse Environment
Human Resource Development In A Cultrually Diverse Environment
 
Organizational Environment
Organizational EnvironmentOrganizational Environment
Organizational Environment
 
Intro to Management
Intro to ManagementIntro to Management
Intro to Management
 
Intro to IT
Intro to ITIntro to IT
Intro to IT
 

Recently uploaded

08448380779 Call Girls In Greater Kailash - I Women Seeking Men
08448380779 Call Girls In Greater Kailash - I Women Seeking Men08448380779 Call Girls In Greater Kailash - I Women Seeking Men
08448380779 Call Girls In Greater Kailash - I Women Seeking MenDelhi Call girls
 
Scaling API-first – The story of a global engineering organization
Scaling API-first – The story of a global engineering organizationScaling API-first – The story of a global engineering organization
Scaling API-first – The story of a global engineering organizationRadu Cotescu
 
08448380779 Call Girls In Friends Colony Women Seeking Men
08448380779 Call Girls In Friends Colony Women Seeking Men08448380779 Call Girls In Friends Colony Women Seeking Men
08448380779 Call Girls In Friends Colony Women Seeking MenDelhi Call girls
 
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...shyamraj55
 
How to Remove Document Management Hurdles with X-Docs?
How to Remove Document Management Hurdles with X-Docs?How to Remove Document Management Hurdles with X-Docs?
How to Remove Document Management Hurdles with X-Docs?XfilesPro
 
04-2024-HHUG-Sales-and-Marketing-Alignment.pptx
04-2024-HHUG-Sales-and-Marketing-Alignment.pptx04-2024-HHUG-Sales-and-Marketing-Alignment.pptx
04-2024-HHUG-Sales-and-Marketing-Alignment.pptxHampshireHUG
 
A Domino Admins Adventures (Engage 2024)
A Domino Admins Adventures (Engage 2024)A Domino Admins Adventures (Engage 2024)
A Domino Admins Adventures (Engage 2024)Gabriella Davis
 
Pigging Solutions Piggable Sweeping Elbows
Pigging Solutions Piggable Sweeping ElbowsPigging Solutions Piggable Sweeping Elbows
Pigging Solutions Piggable Sweeping ElbowsPigging Solutions
 
SQL Database Design For Developers at php[tek] 2024
SQL Database Design For Developers at php[tek] 2024SQL Database Design For Developers at php[tek] 2024
SQL Database Design For Developers at php[tek] 2024Scott Keck-Warren
 
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...Integration and Automation in Practice: CI/CD in Mule Integration and Automat...
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...Patryk Bandurski
 
Unblocking The Main Thread Solving ANRs and Frozen Frames
Unblocking The Main Thread Solving ANRs and Frozen FramesUnblocking The Main Thread Solving ANRs and Frozen Frames
Unblocking The Main Thread Solving ANRs and Frozen FramesSinan KOZAK
 
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024BookNet Canada
 
The Codex of Business Writing Software for Real-World Solutions 2.pptx
The Codex of Business Writing Software for Real-World Solutions 2.pptxThe Codex of Business Writing Software for Real-World Solutions 2.pptx
The Codex of Business Writing Software for Real-World Solutions 2.pptxMalak Abu Hammad
 
Factors to Consider When Choosing Accounts Payable Services Providers.pptx
Factors to Consider When Choosing Accounts Payable Services Providers.pptxFactors to Consider When Choosing Accounts Payable Services Providers.pptx
Factors to Consider When Choosing Accounts Payable Services Providers.pptxKatpro Technologies
 
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...Neo4j
 
From Event to Action: Accelerate Your Decision Making with Real-Time Automation
From Event to Action: Accelerate Your Decision Making with Real-Time AutomationFrom Event to Action: Accelerate Your Decision Making with Real-Time Automation
From Event to Action: Accelerate Your Decision Making with Real-Time AutomationSafe Software
 
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhi
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | DelhiFULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhi
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhisoniya singh
 
Maximizing Board Effectiveness 2024 Webinar.pptx
Maximizing Board Effectiveness 2024 Webinar.pptxMaximizing Board Effectiveness 2024 Webinar.pptx
Maximizing Board Effectiveness 2024 Webinar.pptxOnBoard
 
My Hashitalk Indonesia April 2024 Presentation
My Hashitalk Indonesia April 2024 PresentationMy Hashitalk Indonesia April 2024 Presentation
My Hashitalk Indonesia April 2024 PresentationRidwan Fadjar
 
08448380779 Call Girls In Civil Lines Women Seeking Men
08448380779 Call Girls In Civil Lines Women Seeking Men08448380779 Call Girls In Civil Lines Women Seeking Men
08448380779 Call Girls In Civil Lines Women Seeking MenDelhi Call girls
 

Recently uploaded (20)

08448380779 Call Girls In Greater Kailash - I Women Seeking Men
08448380779 Call Girls In Greater Kailash - I Women Seeking Men08448380779 Call Girls In Greater Kailash - I Women Seeking Men
08448380779 Call Girls In Greater Kailash - I Women Seeking Men
 
Scaling API-first – The story of a global engineering organization
Scaling API-first – The story of a global engineering organizationScaling API-first – The story of a global engineering organization
Scaling API-first – The story of a global engineering organization
 
08448380779 Call Girls In Friends Colony Women Seeking Men
08448380779 Call Girls In Friends Colony Women Seeking Men08448380779 Call Girls In Friends Colony Women Seeking Men
08448380779 Call Girls In Friends Colony Women Seeking Men
 
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...
Automating Business Process via MuleSoft Composer | Bangalore MuleSoft Meetup...
 
How to Remove Document Management Hurdles with X-Docs?
How to Remove Document Management Hurdles with X-Docs?How to Remove Document Management Hurdles with X-Docs?
How to Remove Document Management Hurdles with X-Docs?
 
04-2024-HHUG-Sales-and-Marketing-Alignment.pptx
04-2024-HHUG-Sales-and-Marketing-Alignment.pptx04-2024-HHUG-Sales-and-Marketing-Alignment.pptx
04-2024-HHUG-Sales-and-Marketing-Alignment.pptx
 
A Domino Admins Adventures (Engage 2024)
A Domino Admins Adventures (Engage 2024)A Domino Admins Adventures (Engage 2024)
A Domino Admins Adventures (Engage 2024)
 
Pigging Solutions Piggable Sweeping Elbows
Pigging Solutions Piggable Sweeping ElbowsPigging Solutions Piggable Sweeping Elbows
Pigging Solutions Piggable Sweeping Elbows
 
SQL Database Design For Developers at php[tek] 2024
SQL Database Design For Developers at php[tek] 2024SQL Database Design For Developers at php[tek] 2024
SQL Database Design For Developers at php[tek] 2024
 
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...Integration and Automation in Practice: CI/CD in Mule Integration and Automat...
Integration and Automation in Practice: CI/CD in Mule Integration and Automat...
 
Unblocking The Main Thread Solving ANRs and Frozen Frames
Unblocking The Main Thread Solving ANRs and Frozen FramesUnblocking The Main Thread Solving ANRs and Frozen Frames
Unblocking The Main Thread Solving ANRs and Frozen Frames
 
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024
#StandardsGoals for 2024: What’s new for BISAC - Tech Forum 2024
 
The Codex of Business Writing Software for Real-World Solutions 2.pptx
The Codex of Business Writing Software for Real-World Solutions 2.pptxThe Codex of Business Writing Software for Real-World Solutions 2.pptx
The Codex of Business Writing Software for Real-World Solutions 2.pptx
 
Factors to Consider When Choosing Accounts Payable Services Providers.pptx
Factors to Consider When Choosing Accounts Payable Services Providers.pptxFactors to Consider When Choosing Accounts Payable Services Providers.pptx
Factors to Consider When Choosing Accounts Payable Services Providers.pptx
 
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...
Neo4j - How KGs are shaping the future of Generative AI at AWS Summit London ...
 
From Event to Action: Accelerate Your Decision Making with Real-Time Automation
From Event to Action: Accelerate Your Decision Making with Real-Time AutomationFrom Event to Action: Accelerate Your Decision Making with Real-Time Automation
From Event to Action: Accelerate Your Decision Making with Real-Time Automation
 
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhi
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | DelhiFULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhi
FULL ENJOY 🔝 8264348440 🔝 Call Girls in Diplomatic Enclave | Delhi
 
Maximizing Board Effectiveness 2024 Webinar.pptx
Maximizing Board Effectiveness 2024 Webinar.pptxMaximizing Board Effectiveness 2024 Webinar.pptx
Maximizing Board Effectiveness 2024 Webinar.pptx
 
My Hashitalk Indonesia April 2024 Presentation
My Hashitalk Indonesia April 2024 PresentationMy Hashitalk Indonesia April 2024 Presentation
My Hashitalk Indonesia April 2024 Presentation
 
08448380779 Call Girls In Civil Lines Women Seeking Men
08448380779 Call Girls In Civil Lines Women Seeking Men08448380779 Call Girls In Civil Lines Women Seeking Men
08448380779 Call Girls In Civil Lines Women Seeking Men
 

Agrregate Demand and Supply

  • 1. Aggregate Demand and Aggregate Supply Chapter 31
  • 2.
  • 3.
  • 4.
  • 5. (a) Real GDP 1965 1970 1975 1980 1985 1990 1995 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 $7,000 A Look At Short-Run Economic Fluctuations Recessions Billions of 1992 Dollars Real GDP
  • 6.
  • 7. (b) Investment Spending Billions of 1992 Dollars 300 400 500 600 700 800 900 1,000 $1,100 1965 1970 1975 1980 1985 1990 1995 A Look At Short-Run Economic Fluctuations Recessions Investment spending
  • 8.
  • 9. (c) Unemployment Rate 0 2 4 6 8 10 12 1965 1970 1975 1980 1985 1990 1995 A Look At Short-Run Economic Fluctuations Recessions Unemployment rate Percent of Labor Force
  • 10.
  • 11.
  • 12. The Basic Model of Economic Fluctuations Economist use the model of aggregate demand and aggregate supply to explain short-run fluctuations in economic activity around its long-run trend.
  • 13.
  • 14.
  • 15. Aggregate Demand and Aggregate Supply... 0 Equilibrium output Quantity of Output Price Level Equilibrium price level Aggregate supply Aggregate demand
  • 16.
  • 17. The Aggregate-Demand Curve... 0 Quantity of Output Price Level Aggregate demand P 1 Y 1 Y 2 P 2 2. …increases the quantity of goods and services demanded. 1. A decrease in the price level...
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23.
  • 24. Shifts in the Aggregate Demand Curve... 0 P 1 Y 1 Quantity of Output Price Level Aggregate demand, D 1 D 2 Y 2
  • 25.
  • 26.
  • 27. The Long-Run Aggregate- Supply Curve... Price Level 0 Quantity of Output Natural rate of output Long-run aggregate supply P 1 P 2 2. …does not affect the quantity of goods and services supplied in the long run. 1. A change in the price level…
  • 28.
  • 29.
  • 30.
  • 31. Long-Run Growth and Inflation... Price Level 0 P 1980 Y 1980 AD 1980 LRAS 1980 1. In the long-run, technological progress shifts long-run aggregate supply... LRAS 2000 LRAS 1990 Quantity of Output P 2000 P 1990 2. …and growth in the money supply shifts aggregate-demand... AD 2000 AD 1990 4. …and ongoing inflation. Y 1990 Y 2000 3. …leading to growth in output...
  • 32. Long-Run Growth and Inflation Short-run fluctuations in output and price level should be viewed as deviations from the continuing long-run trends.
  • 33.
  • 34. The Short-Run Aggregate Supply Curve... Price Level 0 Quantity of Output Short-run aggregate supply Y 1 P 1 Y 2 2. reduces the quantity of goods and services supplied in the short run. P 2 1. A decrease in the price level
  • 35.
  • 36.
  • 37.
  • 38.
  • 39.
  • 40.
  • 41. The Long-Run Equilibrium Quantity of Output Price Level 0 Short-run aggregate supply Long-run aggregate supply Aggregate demand A Equilibrium price Natural rate of output
  • 42. A Contraction in Aggregate Demand... Price Level 0 A P 1 Y 1 Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 1. A decrease in aggregate demand… AD 2 Quantity of Output Short-run aggregate supply, AS 1 Long-run aggregate supply Aggregate demand, AD 1 B P 2 Y 2 2. …causes output to fall in the short run… AS 2 C P 3 3. …but over time, the short-run aggregate-supply curve shifts… 4. …and output returns to its natural rate.
  • 43.
  • 44.
  • 45. An Adverse Shift in Aggregate Supply... Long-run aggregate supply Short-run aggregate supply, AS 1 0 Aggregate demand A Y 1 P 1 1. An adverse shift in the short-run aggregate-supply curve… AS 2 Quantity of Output Price Level 3. …and the price level to rise. P 2 2. …causes output to fall… B Y 2
  • 46.
  • 47.
  • 48. Accommodating an Adverse Shift in Aggregate Supply... 0 Short-run aggregate supply, AS 1 Aggregate demand, AD 1 Long-run aggregate supply A P 1 AS 2 1. When short-run aggregate supply falls… Quantity of Output Natural rate of output Price Level P 2 P 3 3....which causes the price level to rise 4. …but keeps output at its natural rate. C 2. …policymakers can accommodate the shift by expanding aggregate demand… AD 2
  • 49.
  • 50. Summary & Graphical Review
  • 51. A Look At Short-Run Economic Fluctuations Recessions (a) Real GDP Billions of 1992 Dollars 1965 1970 1975 1980 1985 1990 1995 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 $7,000 Real GDP
  • 52. A Look At Short-Run Economic Fluctuations Recessions (b) Investment Spending Billions of 1992 Dollars 300 400 500 600 700 800 900 1,000 $1,100 Investment spending 1965 1970 1975 1980 1985 1990 1995
  • 53. A Look At Short-Run Economic Fluctuations Recessions (c) Unemployment Rate Unemployment rate 0 2 4 6 8 10 12 1965 1970 1975 1980 1985 1990 1995 Percent of Labor Force
  • 54. Aggregate Demand and Aggregate Supply... Equilibrium output Quantity of Output Price Level 0 Equilibrium price level Aggregate supply Aggregate demand
  • 55. The Aggregate-Demand Curve... Quantity of Output Price Level 0 Aggregate demand P 1 Y 1 Y 2 P 2 2. …increases the quantity of goods and services demanded. 1. A decrease in the price level...
  • 56. Shifts in the Aggregate Demand Curve... Quantity of Output Price Level 0 Aggregate demand, D 1 P 1 Y 1 D 2 Y 2
  • 57. The Long-Run Aggregate- Supply Curve... Quantity of Output Natural rate of output Price Level 0 Long-run aggregate supply P 1 P 2 2. …does not affect the quantity of goods and services supplied in the long run. 1. A change in the price level…
  • 58. Long-Run Growth and Inflation... 1. In the long-run, technological progress shifts long-run aggregate supply... LRAS 2000 LRAS 1990 Quantity of Output Price Level 0 P 1980 Y 1980 AD 1980 P 2000 P 1990 LRAS 1980 2. …and growth in the money supply shifts aggregate-demand... AD 2000 AD 1990 4. …and ongoing inflation. Y 1990 Y 2000 3. …leading to growth in output...
  • 59. The Short-Run Aggregate Supply Curve... Quantity of Output Price Level 0 Short-run aggregate supply Y 1 P 1 Y 2 2. reduces the quantity of goods and services supplied in the short run. P 2 1. A decrease in the price level
  • 60. The Long-Run Equilibrium Quantity of Output Price Level 0 Short-run aggregate supply Long-run aggregate supply Aggregate demand A Equilibrium price Natural rate of output
  • 61. A Contraction in Aggregate Demand... Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 1. A decrease in aggregate demand… AD 2 Quantity of Output Price Level 0 Short-run aggregate supply, AS 1 Long-run aggregate supply Aggregate demand, AD 1 A P 1 Y 1 B P 2 Y 2 2. …causes output to fall in the short run… AS 2 C P 3 3. …but over time, the short-run aggregate-supply curve shifts… 4. …and output returns to its natural rate.
  • 62. An Adverse Shift in Aggregate Supply... 1. An adverse shift in the short-run aggregate-supply curve… AS 2 Long-run aggregate supply Short-run aggregate supply, AS 1 Quantity of Output Price Level 0 Aggregate demand A Y 1 P 1 3. …and the price level to rise. P 2 2. …causes output to fall… B Y 2
  • 63. Accommodating an Adverse Shift in Aggregate Supply... AS 2 1. When short-run aggregate supply falls… Quantity of Output Natural rate of output Price Level 0 Short-run aggregate supply, AS 1 Aggregate demand, AD 1 Long-run aggregate supply A P 1 P 2 P 3 3....which causes the price level to rise 4. …but keeps output at its natural rate. C 2. …policymakers can accommodate the shift by expanding aggregate demand… AD 2
  • 64.
  • 65.
  • 66.
  • 67.
  • 68.
  • 69.