0 Ch15 Aggregate Demand And Supply Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY Ch15 Aggregate Demand And Supply
1907 18-2 Topics to be Discussed difference between short run long run introduction to aggregate demand aggregate supply in the short run long run see how model of aggregate supply and demand can be used to analyze short-run and long-run effects of "shocks" Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-2 Topics to be Discussed • difference between short run & long run • introduction to aggregate demand • aggregate supply in the short run & long run • see how model of aggregate supply and demand can be used to analyze short-run and long-run effects of “shocks
18-3 10 15.1 Aggregate demand The aggregate demand curve shows the relationship between the price level and the quantity of output demanded. The aggregate-demand curve shows the quantity of goods and services that households,firms,and the government want to buy at each price level. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-3 15.1 Aggregate demand • The aggregate demand curve shows the relationship between the price level and the quantity of output demanded. • The aggregate-demand curve shows the quantity of goods and services that households, firms, and the government want to buy at each price level
1907 18-4 THE AGGREGATE-DEMAND CURVE The four components of GDP ()contribute to the aggregate demand for goods and services. Y=C+I +G NX Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-4 THE AGGREGATE-DEMAND CURVE • The four components of GDP (Y) contribute to the aggregate demand for goods and services. Y = C + I + G + NX
The Aggregate-Demand Curve... Price Level P P2 1.A decrease in the price Aggregate level... demand 0 Y2 Quantity of Output 2....increases the quantity of goods and services demanded
The Aggregate-Demand Curve... Quantity of Output Price Level 0 Aggregate demand P Y Y2 P2 1. A decrease in the price level . . . 2. . . . increases the quantity of goods and services demanded
490 18-6 v的 Why the Aggregate-Demand Curve Is Downward Sloping The Price Level and Consumption:The Wealth Effect (Arthur Pigou (1877-1959):) The Price Level and Investment:The Interest Rate Effect The Price Level and Net Exports:The Exchange- Rate Effect Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-6 Why the Aggregate-Demand Curve Is Downward Sloping • The Price Level and Consumption: The Wealth Effect（（Arthur Pigou（1877-1959)：） • The Price Level and Investment: The Interest Rate Effect • The Price Level and Net Exports: The ExchangeRate Effect
18-7 Why the Aggregate-Demand Curve Is Downward Sloping(1) The Price Level and Consumption:The Wealth Effect -A decrease in the price level makes consumers feel more wealthy,which in turn encourages them to spend more -This increase in consumer spending means larger quantities of goods and services demanded. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-7 Why the Aggregate-Demand Curve Is Downward Sloping(1) • The Price Level and Consumption: The Wealth Effect – A decrease in the price level makes consumers feel more wealthy, which in turn encourages them to spend more. – This increase in consumer spending means larger quantities of goods and services demanded
490 18-8 Nv的 Why the Aggregate-Demand Curve Is Downward Sloping(2) The Price Level and Investment:The Interest Rate Effect -A lower price level reduces the interest rate,which encourages greater spending on investment goods. This increase in investment spending means a larger quantity of goods and services demanded. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-8 Why the Aggregate-Demand Curve Is Downward Sloping(2) • The Price Level and Investment: The Interest Rate Effect – A lower price level reduces the interest rate, which encourages greater spending on investment goods. – This increase in investment spending means a larger quantity of goods and services demanded
18-9 Why the Aggregate-Demand Curve Is Downward Sloping(3) The Price Level and Net Exports:The Exchange- Rate Effect -When a fall in the price level causes interest rates to fall, the real exchange rate depreciates,which stimulates net exports. The increase in net export spending means a larger quantity of goods and services demanded. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-9 Why the Aggregate-Demand Curve Is Downward Sloping(3) • The Price Level and Net Exports: The ExchangeRate Effect – When a fall in the price level causes interest rates to fall, the real exchange rate depreciates, which stimulates net exports. – The increase in net export spending means a larger quantity of goods and services demanded
190 18-10 Shifts in the AD Curve The five main shift factors of aggregate demand are: Foreign income. Expectations about future output or prices. Exchange rate fluctuations The distribution of income. Government policies. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-10 Shifts in the AD Curve • The five main shift factors of aggregate demand are: Foreign income. Expectations about future output or prices. Exchange rate fluctuations. The distribution of income. Government policies