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the economy is always..
fluctuating
business cycles aren't necessarily
uniformly scheduled
long run aggregate supply measures
real output
the only things that affect LRAS are
change in tech and change in resources
prices do not affect what curve?
LRAS
why does price not affect LRAS?
because in the long run, real output always stays the same
what is the only thing that does not shift short run aggregate supply?
change in price of goods outputted
what shifts short run aggregate supply
change in expected future prices, change in price of inputs, change in tech, and change in resources
when prices go up, we move in what direction ALONG the aggregate demand curve?
left
why do we go left along the AD curve when prices go up?
because foreigners become less likely to buy and domestic buyers will favor imports
6 things that shift the ENTIRE AD curve
consumer confidence, business confidence, tax, government spending, foreigner spending habits, and money supply
why does money supply shift the ENTIRE AD curve?
money supply controls the expansion and contraction of the business cycle
stagflation is when
both unemployment and inflation rises at the same time
the only shift of a certain curve that can cause stagflation is
the shifting of the SRAS curve to the left
one thing that can cause SRAS curve to shift to the left is
increase in prices of anything that will make production more expensive
aggregate supply curve is not found by simply
simply adding up individual products demand curve horizontally or vertically
aggregate demand slopes down because as prices increase…
interest rate increases
