WHY THE SHORT-RuN AGGREGATE-SUPPLY CURVE MIGHT SHIFT

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WHY THE SHORT-RuN AGGREGATE-SUPPLY CURVE MIGHT SHIFT The short-run aggregate-supply curve tells us the quantity of goods and services supplied in the short run for any given level of prices. This curve is similar to the long-run aggregate-supply curve, but it is upward sloping rather than vertical because 0 of sticky wages, sticky prices, and misconceptions. Thus, […]

WHY THE AGGREGATE-SUPPLY CURVE SLOPES UPWARD IN THE SHORT RUN

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WHY THE AGGREGATE-SUPPLY CURVE SLOPES UPWARD IN THE SHORT RUN The key difference between the economy in the short run and in the long run is the behavior of aggregate supply. The long-run aggregate-supply curve is vertical because, in the long run, the overall level of prices does not affect the economy’s ability to produce goods and […]

USING AGGREGATE DEMAND AND AGGREGATE SUPPLY TO DEPICT LONG-RUN GROWTH AND INFLATION

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USING AGGREGATE DEMAND AND AGGREGATE SUPPLY TO DEPICT LONG-RUN GROWTH AND INFLATION Having introduced the economy’s aggregate-demand curve and the long-run aggregate-supply curve, we now have a new way to describe the economy’s long-run trends. Figure 5 illustrates the changes that occur in an economy from decade to decade. Notice that both curves are shifting. Although there […]

WI-f’I THE LONG-RUN AGGREGATE-SUPPLY CURVE MIGHT SHIFT

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WI-f’I THE LONG-RUN AGGREGATE-SUPPLY CURVE MIGHT SHIFT Because classical macroeconomic theory predicts the quantity of goods and services produced by an economy in the long run, it also explains the position of the long-run aggregate-supply curve. The long-run level of production is sometimes called potential output or full-employment output. To be more precise. Any change in the […]

WHY THE AGGREGATE-SUPPLY CURVE Is VERTICAL IN THE LONG RUN

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WHY THE AGGREGATE-SUPPLY CURVE Is VERTICAL IN THE LONG RUN What determines the quantity of goods and services supplied . question earlier in the book when we analyzed the  implicitly answered. In the long run.When we analyzed these forces that govern long-run growth, we did not need to make any reference to the overall level of prices. […]

THE AGGREGATE-SUPPLY CURVE

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THE AGGREGATE-SUPPLY CURVE The aggregate-supply curve tells us the total quantity of goods and services that firms produce and sell at any given price level. Unlike the aggregate-demand corvette, which is always downward sloping, the aggregate-supply curve shows a relationship that depends crucially on the time horizon examined. In the long run, the aggregate-supply curve is vertical, whereas […]

WHY THE AGGREGATE DEMAND CURVE MIGHT SHIFT

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WHY THE AGGREGATE DEMAND CURVE MIGHT SHIFT The downward slope of the aggregate-demand curve shows that a fall in the price quantity of goods and services demanded. Many other factors, however. Services demanded at a given price level. When one of these other factors curve shifts. Let’s consider some examples of events that shift aggregate demand. We […]

WHY THE AGGREGATE-DEMAND CURVE SLOPES DOWNWARD

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WHY THE AGGREGATE-DEMAND CURVE SLOPES DOWNWARD Why does a change in the price level move the quantity of goods and services demanded in the opposite direction? To answer this question, it is useful to recall that an economy’s GDP (which we denote as Y) is the sum of its consumption (C), investment (I), government purchases (G), and […]

THE AGGREGATE-DEMAND CURVE

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THE AGGREGATE-DEMAND CURVE The aggregate-demand curve tells us the quantity of all goods and services demanded in the economy at any given price level. As Figure 3 illustrates, the aggregate-demand curve is downward sloping. This . means that, other things equal, a decrease in the economy’s overall level of prices (from, say, PI to P2) raises the quantity […]

THE MODEL OF AGGREGATE DEMAND AND AGGREGATE SUPPLY

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THE MODEL OF AGGREGATE DEMAND AND AGGREGATE SUPPLY Our model of short run economic fluctuations focuses on the behavior of two variables. The first variable is the economy’s output of goods and services, as measured by real GDP. The second is the average level of prices, as measured by the CPI or the GDP defoliator, Notice that […]