Chapter 7: Aggregate Demand and Aggregate Demand and ...
Chapter 7: Aggregate Demand and Aggregate Demand and ...
Chapter 7: Aggregate Demand and Aggregate Demand and ...
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Long Run<br />
<strong>Aggregate</strong> Supply<br />
Changes in <strong>Aggregate</strong> Supply<br />
ce Level<br />
Pric<br />
Long Run<br />
<strong>Aggregate</strong><br />
Supply<br />
AS LR<br />
Determinant: Factor(s) of Determinant: AS<br />
shifts:<br />
Input Prices Domestic resource prices rise<br />
Prices of imported resources rise<br />
Increased market power<br />
LEFT<br />
Productivity Increases in productivity RIGHT<br />
Legal-<br />
Institutional<br />
Environment<br />
Higher business taxes<br />
More government regulation<br />
LEFT<br />
LO: 7-2<br />
Real Domestic Output, GDP<br />
7-9<br />
LO: 7-2<br />
7-10<br />
Shifts in the <strong>Aggregate</strong><br />
Supply Curve<br />
LO: 7-2<br />
Pric ce Level<br />
Decrease in<br />
<strong>Aggregate</strong><br />
Supply<br />
AS 3<br />
AS1<br />
Real Domestic Output, GDP<br />
AS 2<br />
Increase in<br />
<strong>Aggregate</strong><br />
Supply<br />
Equilibrium Price Level <strong>and</strong><br />
Real GDP<br />
• Equilibrium occurs at the price level that<br />
equalizes the amount of real output<br />
dem<strong>and</strong>ed <strong>and</strong> supplied.<br />
• The equilibrium point is the intersection<br />
of the aggregate dem<strong>and</strong> curve <strong>and</strong><br />
aggregate supply curve.<br />
• This intersection determines the<br />
equilibrium price level <strong>and</strong> equilibrium<br />
real output.<br />
LO: 7-3<br />
7-11<br />
7-12
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