TheAggregateSupplyAggregateDemandModel

1、the aggregate supply aggregate demand modelcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia6-*the aggregate supply/ aggregate demand model2012copyright ? 2004 mcgraw-hill australia pty l

2、td ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*learning objectiv

3、esintroduce the keynesian aggregate expenditure model and discuss the importance of the multiplier effect.introduce the of aggregate demand and aggregate supply model. copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, uni

4、versity of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*autonomous expenditure changesshifts in the ae curve due to changes in autonomous expenditureresult in ne

5、w equilibrium levels of output (gdp)how much output changes by depends on the size of the expenditure multipliercopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hi

6、ll australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*expenditure multipliera change in autonomous expenditure results in a change in equilibrium income that is a multiple of the initial changethe multiplier is defi

7、ned as the ratio of the change in gdp arising from a change in autonomous spendingcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a

8、macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*changes in equilibrium gdp and the multiplierprivate spending (billions of dollars)saving and investment(billions of dollars)0045o51049047045043020i0390 450 470 490 510equilibrium gdpat i1 le

9、vel of investments(c + i ) 0390 450 470 490 510(c + i ) 1i1if i increases.real gdpreal gdpcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd p

10、pts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*changes in equilibrium gdp and the multiplierprivate spending (billions of dollars)saving and investment(billions of dollars)0045o51049047045043020i0430 450 470 490 510equilibrium gdp

11、at i2 level of investment(c + i ) 0s430 450 470 490 510(c + i ) 2i2if i decreases.real gdpreal gdpcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia p

12、ty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*the multiplier effecta change in autonomous spending gives rise to a larger change in gdpthe multiplier effect arises because initial increase in aggregate expenditure will in

13、duce successive rounds of increased expenditurecopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and m

14、civerslides prepared by muni perumal, university of canberra, australia7-*multiplier and marginal propensitiesa relationship exists between the mps (the amount of leakage) and the multipliermultiplier = 1/mps = 1/(1 mpc)the simple multiplier is defined as 1/mps, when the leakage in the economy is on

15、ly savingcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal,

16、university of canberra, australia7-*recessionary gapthe amount by which aggregate expenditures are deficient to that required to generate the full employment level of gdpproduces a concretionary impact upon the economycopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jack

17、son and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*recessionary gap (cont.)real gdp (billions of dollars)0

18、45o470 490 510(c + i )0full employmentprivate spending (billions of dollars)(c + i )1recessionarygap copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australi

19、a pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia7-*inflationary gapis the amount by which aggregate spending exceeds that required to achieve full employmentproduces an inflationary effect on the economycopyright ? 2004 mcg

20、raw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, austr

21、alia7-*inflationary gap (cont.)real gdp (billions of dollars)045o470 490 510(c + i )0full employmentprivatespending (billions of dollars)(c + i )1inflationarygap copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, universit

22、y of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*aggregate demand (ad)represents the amount of goods and services that consumers, businesses, government and for

23、eign buyers are willing and able to buy at various price levelscopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e

24、by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*ad curvethe ad curve is downsloping due to:interest-rate effectreal-balances effect (wealth effect)foreign-purchases effectcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson a

25、nd mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*aggregate demand curve0price levelreal gross domestic output

26、adcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, univers

27、ity of canberra, australia8-*interest-rate effectrising price level causes higher nominal interest rates, which causes reduction in certain kinds of consumption and investment spendingmost importantly, investment spendingcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by j

28、ackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*real-balances effectalso known as wealth effectat a

29、higher price level, the real value or purchasing power of the accumulated financial assets held by the public falls (real wealth falls), leading to a fall in consumption spendingcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni pe

30、rumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*foreign-purchases effecthigher domestic prices cause the relative price of foreign goods (local

31、 goods) to decrease (increase)this causes increased imports and decreased exports, resulting in a fall in net exportscopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgr

32、aw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*(c + i + g + nx)2 at p 2(c + i + g + nx)2 at p3the aggregate demandcan be constructedderiving the ad curve (cont.)spending(billions of dollars)00price level

33、real gdpreal gdpp1(c + i + g + nx)1 at p 111gdp1p2gdp2223p3gdp33copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e

34、 by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*non-price determinantsof aggregate demandresults in shift in the ad curvehousehold consumptioninvestment spendinggovernment spending and taxesexportsimportsbut what changes these?copyright ? 2004 mcgraw-hill a

35、ustralia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*cha

36、nges in aggregate demand0price levelreal gross domestic outputad1ad3ad2increase in addecrease in adcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia

37、pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*aggregate supply (as)indicates the level of real gdp that will be produced at each possible price levelcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics

38、7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*short-run aggregate supply curveupward slopi

39、ng and is constructed on the basis of two assumptions:a given price levelnominal wages have been established on the expectations that the given price level will persistcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, uni

40、versity of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*as1short-run asprice levelreal gross domestic output0p1a1qpp3a3q3p2a2q2copyright ? 2004 mcgraw-hill austr

41、alia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*long-ru

42、n asprice levelreal gross domestic output, gdp0p3p1p2as3a1as1as2c1b1aslsqpa3a2copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiaproduction possibilities frontier and the lras consumer good

43、s capital goods)01234551015copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared

44、 by muni perumal, university of canberra, australia8-*non-price determinants of asshift the as curvechanges in input priceschanges in productivitychanges in the legal and institutional environment copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides

45、prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*changes in short-run asprice levelreal gross domestic output0as1as2decrease

46、in short-run ascopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni per

47、umal, university of canberra, australia8-*changes in short-run asprice levelreal gross domestic output0as3as1increase in short-run ascopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyr

48、ight ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*changes in long-run asprice levelreal gross domestic output, gdp0asls1qpqpasls3increase in long-run ascopyright ? 2004 mcgraw-hill australia

49、 pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*asls1qpchan

50、ges in long-run asprice levelreal gross domestic output0asls2qpdecrease in long-run ascopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts

51、t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*equilibriumintersection of as and ad determines equilibrium real gdp and the price levelat all other points there will be pressure on real gdp and/or prices to changecopyright ? 2004 mcgr

52、aw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, austra

53、lia8-*aslsqpasequilibrium real gdp and equilibrium price levelprice levelreal domestic outputadqepeq1p3 q2p2copyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill a

54、ustralia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australia8-*shift in aggregate demand and the price levelthe effects of an increase in aggregate demand on the price level depend upon the position of the short-run aggregate su

55、pply in which it occursdemand-pull inflation is a situation of rising prices due to shift in adcopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university of canberra, australiacopyright ? 2004 mcgraw-hill australia pty ltd ppts t/a macroeconomics 7/e by jackson and mciverslides prepared by muni perumal, university