In class students were introduced to the Aggregate Demand curve and learned it was downward sloping because of the Wealth effect, Interest Rate effect and Exchange Rate effect. Shifts in the demand curve are due to GWEP (changes in: Government Policies, Wealth, Expectations, Physical Stock).
Afterwards, students were introduced to the two Aggregate Supply curves (SRAS/LRAS). The SRAS curve is upward sloping because of "sticky wages" meaning wages are slow to increase and reduce production costs in the short run. Shifts in the SRAS are due to PNC (changes in: Productivity, Nominal Wages, Commodity Prices).
The LRAS is vertical because in the LR all process are flexible. Shifts in the LRAS are from (1) changes in Resources (CELL) and (2) changes in technology.
The homework is listed below and the notes are attached.
Notes - Aggregate Demand and Aggregate Supply
HW - Complete Module 17 and 18 Questions
- Read Module 19
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