Download Equilibrium in the Aggregate Demand

Equilibrium in the Aggregate Demand-Aggregate Supply Model (AS-AD)
Student Guide (34 Points)
Name
WE JUST LEARNED
• ILLUSTRATE how the aggregate supply curve illustrates the relationship between the aggregate price
level and the quantity of aggregate output supplied in the economy
• IDENTIFY what factors can shift the aggregate supply curve
• EXPLAIN why the aggregate supply curve is different in the short run from in the long run
TODAY’S GOAL IS to
• REVIEW the difference between short-run and long-run macroeconomic equilibrium
• IDENTIFY the causes and effects of demand shocks and supply shocks
• RECOGNIZE if an economy is experiencing a recessionary gap or an inflationary gap
1. COMPLETE the AD Concept Check Questions posted on the online classroom in class. (34 points)
2. REVIEW module 19 Tackle the Test questions
3. TAKE NOTES as the instructor review the PowerPoint for Module 19
URL for audio of lesson: http://www.youtube.com/watch?v=eRoCDb2d2TU&feature=youtube_gdata
Shifts in the short run (but in the long run are SELF CORRECTING) Keynes doesn’t want to wait!
• Negative Demand Shocks = Decrease Demand
• Positive Demand Shocks = Increase Demand
• Negative Supply Shocks = Decrease Supply but lead to higher prices (stagflation)
• Positive Supply Shocks = Increase Supply
• Inflationary gap (the economy is overheating)
• Recessionary gap (the economy is struggling)
ASSESSMENT
IDENTIFY the type of shock for each scenario below. We will review in class.
• Iran stops selling oil
• Unemployment skyrockets
• Assembly line invented
• Stock market booms and housing market prices soar
Homework: READ module 20 and ANSWER Tackle the Test Questions 1-5.
TOMORROW WE WILL LEARN ABOUT
• How the AD-AS model is used to formulate macroeconomic policy
• The rationale for stabilization policy
• Why fiscal policy is an important tool for managing economic fluctuations
• Which policies constitute expansionary fiscal policy and which constitute contractionary fiscal policy