文档介绍：Intermediate Macroeconomics
Lecture 7
How the SR and LR Differ
In the LR, prices are flexible and can respond to changes in S or D. In the SR, many prices are stuck at some predetermined level.
In the SR, ary policy does have a potent effect on output and employment!
Aggregate Demand
Shifts in the AD curve --- change in money supply
P
Y
AD
1
100
170
2
50
85
AD’(M )
Aggregate Supply
LR . SR
P
Y
P
Y
LRAS
SRAS
Shocks to AD
Introduction of ATM
P
Y
LRAS
SRAS
A
B
C
Shocks to AS
Only on SRAS (change the cost of production)
How to deal with adverse supply shock
P
Y
LRAS
SRAS
AD
A
SRAS’
B
C
Shocks to AS
When the economy suffers from adverse supply shock, policy makers have 2 choices
Do nothing
stagflation back to normal
Increase AD to modate the shock
inflation
Shocks to AS
Change in oil price
Shocks to AS
Energy use (kg of oil equivalent per capita)
The IS-LM Model
Classical model cannot explain the Great Depression
LR . SR
IS --- “investment” and “savings”
LM --- “liquidity” and “money”
Takes the price level as exogenous and shows what determines national e