The aggregate demand/ aggregate supply models

-
THE AD/AS MODELImage result for the as ad model
  • The equilibrium of AD and AS determines the current output (REAL GDP) and the price level (PL)
  • Full Employment
    • Full employment equilibrium exists where AD intersects SRAS and LRAS at the same point.
Image result for recessionary gap
  • Recessionary Gap
    • A recessionary gap exists when equilibrium occurs below full employment output.
Image result for inflationary gap
  • Inflationary Gap 
    • An inflationary gap exists when equilibrium occurs beyond full employment output.
CHANGES (𝚫) in AD


Image result for increase in AD

Image result for decrease in ad
CHANGES in SRAS

INCREASE

Image result for increase sras
DECREASE
Image result for decrease sras
THREE RANGES 
  • Horizontal or Keynesian Range: A lot of unemployed resources which creates a recession or depression. 
    • Includes only levels of real GDP that are less than the full employment output.
  • Intermediate Range: Resources are getting closer to the full employment level, which creates pressure on wages and prices.
  • Vertical/Classical Range: Where real GDP is at a level with unemployment at the full employment level, and where any increase in demand will result only in an increase in prices.
    • The economy is unable to produce any more goods and services for a sustainable period of time.

Comments

Post a Comment

Popular posts from this blog

-
GDP  GDP gross domestic product - total market value of all final goods and services produced within a country's borders with in each year.  GNP gross national product - the sum of all total goods and services produced by residents of a country during a given year. Using foreigners.  Intermediate goods-  goods that require further processing before they are ready for final use. Ex: steering wheel, something that you use to make a product What’s not included in GDP?  1.) Used goods/ second hand goods- Trying to avoid double or multiple counting.  Ex: whoever purchased that item once is official. So, if someone bought it again it can't be counted. 2.) Gifts or transfer payments- can be public or private. Ex: transferring funds from one institution/ individual to another. For private it would be scholarships for transfer it would be welfare or social security.  3.) Stocks and bonds- purely financial transactions 4.) Unreported...
Read more

Monetary policy

-
Image
UNIT 4 - MONETARY POLICY Uses of Money Medium of exchange Unit of account Store of value Store of Value Is this really a dollar? Is this actually worth a dollar? If you have money in an account and money in storage, are they the same value? No, because banks draw interest Types of Money Commodity money Gold, silver significant economic value Representative money IOUs Fiat money Characteristics of money Durability Cutting a dollar in half, going to the bank to exchange it Portability Divisibility Uniformity Scarcity Acceptability  Money Supply M1 Money Cash Coins Currency Traveler's checks (cheques) Demand or checkable deposits Checkable deposits are the largest component of M1 M2 Money M1 + savings accounts M3 Money M2 + money market accounts + CD's MMA = An account that grows interest CD = certificate of deposit: people deposit money to bank, interest grows, bank gives money back to you + interest Liquidity...
Read more
-
Image
BASIC ECONOMIC CONCEPTS Before anyone can start learning the more complex parts of economics they must first understand some of the more basic principles. Microeconomics- Supply and demand. Firms reaction. Positive vs. Normative economics- Positive economics claims that attempt to describe the world as is. Very descriptive. An example would be minimum wage laws causes unemployment. Current is 7.25. Minimum wage laws causes unemployement. This excludes things like waitors. Normative economics claims that attempt to prescribe how the world should be. Very prescriptive. Based on an opinion. An example is that the government should raise the minimum wage.  Wants- desire of the citizens Needs- basic requirements for survival. Scarcity- fundamental economic problem that all societies face. Unlimited wants with limited resources. Shortage- looking where quantity demanded is greater then quantity supplied. Prices rise. Surplus- opposite of shortage. An abundance ...
Read more