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Transcript 
Chapter 7
Aggregate Demand,
Aggregate Supply,
and the
Self-Correcting
Economy
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
Figure 7-1 Effect on Real Income
of Different Values of the Price Level
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-2
Figure 7-2 The Effect on the AD Curve of
a Doubling of the Nominal Money Supply
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-3
Figure 7-3 The Effect on the AD Curve of a
Decline in Planned Autonomous Spending
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-4
Figure 7-4 Effect of a Rightward Shift in the
AD Curve with Three Alternative Short-Run
Aggregate Supply Curves
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-5
Figure 7-5 The Labor Demand Curve and the
Short-Run Aggregate Supply Curve
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-6
Figure 7-6 The Short-Run
Aggregate Supply Curve for Two Different
Values of the Wage Rate, and W1 W0
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-7
Figure 7-7 Determination of the
Equilibrium Real Wage Rate
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-8
Figure 7-8 Effects on the Price Level and Real
Income of an Increase in Planned Autonomous
Spending from to AD1 AD0
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-9
Figure 7-9
Effect of a Decline in Planned Spending When
the Price Level Is Perfectly Flexible
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-10
Figure 7-10
The Lack of Effect of a Drop in the Price Level
When There Is a Failure of Self-Correction
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-11
Figure 7-11
Effect of a Decline in Planned Spending When
the Nominal Rate Is Fixed at W0
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-12
Table 7-1
Money, Output, Unemployment, Prices, and
Wages in the Great Depression, 1929–41
International Perspective
Why Was the Great Depression Worse in the
United States than in Europe?
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-14
Figure 7-12 The Price Level (P) and the Ratio
of Actual to Natural Real GDP (Y /YN) During
the Great Depression, 1929–41
Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
7-15
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