INTRODUCTION TO MACROECONOMICS E202 $ ¥ Dr. David A. Dilts Department of Economics Doermer School of Business and Management Sciences Indiana-Purdue University-Fort Wayne June 1, 1993 Revisions: May 1994, December 1995, July 1996, November, 2000, May 2003, May 2006 PREFACE This Course Guide was developed in part because of the high cost of college textbooks, and in part, to help organize students’ studying by providing lecture notes together with the reading assignments. This Guide is
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expansion of the productive potential of an economy. Therefore, to ensure such growth, aggregate supply must continually shift outwards as shown in the diagram below. AS AS Price Level 1 2 P 1 P 2 AD Figure 1: Long-term economic growth 1 Real Gross Domestic Product Y Y 1 2 The diagram shows aggregate supply shifting outwards from AS to AS and consequently the price level falls from P to
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AD/AS Models, U.S. Economic Critique ECO/372 April 20, 2015 Professor Godwin Quashigah AD/AS Models – U.S. Economic Critique The U.S. economy is primarily based on aggregate demand and aggregate supply (AD/AS), and significantly influenced by the factors of unemployment, expectations, consumer income, and interest rates. In addition, fiscal policies introduced by government leadership can affect the economy if they are effective. In the following paragraphs, we will examine the current
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expectations, consumer income, and interest rates. We will identify the existing effect of the economic factors on aggregate demand and supply. In addition, we will identify current recommended fiscal policies by government leadership. This information will allow us to evaluate the effectiveness of the current fiscal policy recommendations using the Keynesian and Classical model perspectives. The United States have ridden this wild ride of the economy for years, this makes understanding the current
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of people in the economy who want to work -demand curve: how many workers firms will want to hire at various real wage rates downward sloping: as the wage rate increases, each firm in the economy will find to maximize profit it should employ fewer workers than before a rise in the wage rate will decrease the quantity of labor demanded in the economy -demand curve shifts: the capital stock, the availability of resources, taxes on goods sold -supply curve shifts: size of the population, tastes
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Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 18 Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply-Side Economics 18.1 Keynesian Economics 1 Multiple Choice 1) Who wrote the General Theory of Employment, Interest, and Money? A) Adam Smith B) David Ricardo C) Milton Friedman D) John Maynard Keynes Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact
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to answer either (A), or (B)' but NOT BOTH. A. Assume that the Asset Demand for money is relatively elastic or flat, and that the Investment Demand Curve, is relatively inelastic or steep. Compare and contrast the effect of an increase in Money Supply upon the overall level of economic activity, using both the traditional transmission mechanism, and in the IS'LM model. Are there any major differences between these 2 models? Your answer should include all relevant diagrams. (20 marks IN
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flow of income model, total expenditures must always equal total income b. There is an inverse relationship between the price level and the quantity of aggregate supply c. If the U.S. price level decreases, net exports will decline 4. Indicate what each of the variables in the following equation represents. Y = C + G + I = X 5. If the price level and the level of real GDP both increase, would it be more likely that the aggregate the supply curve or the aggregate demand curve shifted?
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Chapter 25: Aggregate Demand, Aggregate Supply and Modern Macroeconomics Questions for Thought and Review 1. The central difference between activist and laissez-faire economists is their differing views about whether the economy is self-regulating. Laissez-faire economists (Classicals) believe the pricing mechanism will bring the economy to an equilibrium (potential output and full employment) while activist economists (Keynesians) do not share that belief. 2. Classicals felt that if
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downturn (upswing reversal) in Keynes’s model begins with a change in consumers and investors’ expectations. Downswing begins with a decrease in business and speculator confidence that reduces stock and other securities prices and also lowers investment demand. This creates a multiplier effect, where lower investment spending reduces aggregate income, which in turn forces households to reduce their spending and accumulate savings, which further decreases aggregate income. As a result, even if there is
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