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Lecture Comments (8)

1 answer

Last reply by: Professor Jibin Park
Tue Mar 22, 2016 12:26 PM

Post by Sarmad Khokhar on March 9 at 02:30:31 PM

Why wasn't LRAS on right side when you drew self correcting recessionary gap ?

1 answer

Last reply by: Professor Jibin Park
Thu Aug 27, 2015 1:09 AM

Post by Jim Tang on August 27, 2015

Why does increasing the prices of oil shift the supply to the left again? I thought that higher prices ==> larger incentive for aggregate suppliers to produce more ==> more supply.

1 answer

Last reply by: Professor Jibin Park
Mon Jan 12, 2015 5:20 PM

Post by Thadeus McNamara on January 3, 2015

10:45 why do the wages decrease?

1 answer

Last reply by: Angela Patrick
Wed May 14, 2014 8:08 PM

Post by Angela Patrick on May 14, 2014

I thought example 4 should be A because the tax multiplier should always have a greater magnitude at every MPC value, so if the government spending is the same as the amount taxes are increased, the taxes would have a greater impact.

Aggregate Supply & Demand

  • The short-run macroeconomic equilibrium occurs where the SRAS = AD
  • The long-run macroeconomic equilibrium occurs where the LRAS = AD
  • If the short-run equilibrium is to the left of the long-run equilibrium, the economy is experiencing a recession
  • If the short-run equilibrium is to the right of the long-run equilibrium, the economy is experiencing inflation
  • In the long-run, the economy will “self-correct” with the SRAS moving back to the LRAS
  • Expansionary fiscal and monetary policy make sense when the economy is experiencing a recession
  • Contractionary fiscal and monetary policy usually take place in reaction to inflationary times

Aggregate Supply & Demand

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:11
  • Long-Run Macroeconomic Equilibrium 1:06
  • The AD-AS Model 3:29
    • Short-Run Macroeconomic Equilibrium
    • Long-Run Macroeconomic Equilibrium
    • Recessionary Gap
    • Inflationary Gap
  • The Long-Run Approach 5:50
    • Initial Negative Demand Shock
    • Higher Unemployment in the Short-Run
    • Economy Moves Back to Potential Output
  • Self-Correcting Recessionary Gap 7:54
  • Expansionary Fiscal Policy 11:22
    • 'In the Long-Run, We Are All Dead'
    • Increase Government Spending
    • Decrease Taxes
    • Increase in Government Transfers
  • Expansionary Fiscal Policy Graph 14:27
  • The Long-Run Approach 18:08
    • An Initial Positive Demand Shock
    • Higher Inflation and Reduced Unemployment
    • Economy Moves Back to Potential Output
  • Self-Correcting Inflationary Gap 19:04
  • Contrationary Fiscal Policy 22:39
    • President Johnson's Temporary Hike on Income Taxes
    • Decrease Government Spending
    • Increase Taxes
    • Decrease in Government Transfers
  • Contrationary Fiscal Policy Graph 24:05
  • Stabilization Policy 28:10
    • Government Policy to Refuce the Severity of Recessions
    • Should the Government Use Fiscal Policy to Reduce the Severity of Negative Demand Shocks
    • What Should the Government Due in the Face of a Negative Supply Shock?
  • Example 1 31:32
  • Example 2 34:30
  • Example 3 38:22
  • Example 4 39:58