Chapter 19 Aggregate Demand and Aggregate Supply Three key facts about economic fluctuations Explaining Short-Run Economic Fluctuations The Aggregate-Demand Curve The Aggregate-Supply Curve Two causes of economic fluctuations
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Three Key Facts About Economic Fluctuations
Explaining short-run economic fluctuations
1. The economy’s output of goods and services, measured by real GDP
2. The overall price level, measured by the CPI or GDP Deflator
The Aggregate Demand Curve
1. Pigou’s Wealth Effect
2. Keynes’ Interest Rate Effect
1. Changes in spending plans by consumers or firms.
2. Changes in fiscal or monetary policy.
The Aggregate Supply Curve
Why the AS curve is vertical in the long run
Why the long-run AS curve might shift
A new way to depict long-run growth and inflation
Why the aggregate-supply curve slopes upward in the short-run
Why the short-run AS curve might shift
Two Causes of Economic Fluctuations
The long-run equilibrium: See Figure 19-7
Actions by Policy-makers During Periods of Recession