Mr mayer ap macroeconomics
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Mr. Mayer AP Macroeconomics. The AS/AD Model. The AS/AD Model. The equilibrium of AS & AD determines current output (GDP R ) and the price level (PL). LRAS. SRAS. PL. P. AD. Y F. GDP R. Full Employment.

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Mr. Mayer AP Macroeconomics

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Mr mayer ap macroeconomics

Mr. MayerAP Macroeconomics

The AS/AD Model


The as ad model

The AS/AD Model

  • The equilibrium of AS & AD determines current output (GDPR) and the price level (PL)

LRAS

SRAS

PL

P

AD

YF

GDPR


Full employment

Full Employment

  • Full Employment equilibrium exists where AD intersects SRAS & LRAS at the same point.

LRAS

SRAS

PL

P

AD

YF

GDPR


Recessionary gap

Recessionary Gap

  • A recessionary gap exists when equilibrium occurs below full employment output.

SRAS

LRAS

PL

P

AD

Y

YF

GDPR


Inflationary gap

Inflationary Gap

  • An inflationary gap exists when equilibrium occurs beyond full employment output.

LRAS

SRAS

PL

P

AD

YF

Y

GDPR


Changes in ad

Changes (Δ)in AD

  • Δ Consumption (C)

    • C↑ .: AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑

    • C↓ .: AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓

  • Δ Gross Private Investment (IG)

    • IG↑ .: AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑

    • IG↓ .: AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓

  • Δ Government Spending (G)

    • G↑ .: AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑

    • G↓ .: AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓

  • Δ Net Exports (XN)

    • XN↑ .: AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑

    • XN↓ .: AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓


Increase in ad

Increase in AD

SRAS

LRAS

PL

P1

P

AD1

AD

Y

YF

GDPR

C↑, IG↑, G↑ and/or XN↑ .: AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑


Decrease in ad

Decrease in AD

LRAS

PL

SRAS

P

P1

AD

AD1

YF

Y

GDPR

C↓, IG↓, G↓ and/or XN↓ .: AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓


Changes in sras

Changes (Δ)in SRAS

  • Δ Input Prices

    • Input Prices↓ .: SRAS  .: GDPR↑ & PL↓ .: u%↓ & π%↓

    • Input Prices↑ .: SRAS  .: GDPR↓ & PL ↑ .: u%↑ & π%↑

  • Δ Productivity

    • Productivity↑ .: SRAS  .: GDPR↑ & PL↓ .: u%↓ & π%↓

    • Productivity↓ .: SRAS  .: GDPR↓ & PL ↑ .: u%↑ & π%↑

  • Δ Legal-Institutional Environment

    • Deregulation .: SRAS  .: GDPR↑ & PL↓ .: u%↓ & π%↓

    • Regulation .: SRAS  .: GDPR↓ & PL ↑ .: u%↑ & π%↑


Increase in sras

Increase in SRAS

SRAS

LRAS

PL

SRAS1

P

P1

AD

Y

YF

GDPR

Input Prices↓, Productivity↑, and/or Deregulation

.: SRAS  .: GDPR↑ & PL↓ .: u%↓ & π%↓


Decrease in sras

Decrease in SRAS

SRAS1

LRAS

PL

SRAS

P1

P

AD

Y1

YF

GDPR

Input Prices↑, Productivity↓, and/or Regulation

.: SRAS  .: GDPR↓ & PL↑ .: u%↑ & π%↑


As ad summary

AS / AD Summary

  • ΔC, ΔIG, ΔG, and/or ΔXN = Δ AD

    • AD  .: GDPR↑ & PL↑ .: u%↓ & π%↑

    • AD  .: GDPR↓ & PL↓ .: u%↑ & π%↓

  • Δ Input Prices, Δ Productivity,

    and/or Δ Regulation = Δ SRAS

    • SRAS  .: GDPR↑ & PL↓ .: u%↓ & π%↓

    • SRAS  .: GDPR↓ & PL ↑ .: u%↑ & π%↑

  • The AS/AD Model is the most important graph in AP Macroeconomics.

  • KNOW IT!!!


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