tailieunhanh - Lecture Business economics - Lecture 23: Aggregate demand and aggregate supply - I

This chapter introduces: Short run economic fluctuations, the basic model of economic fluctuations, the aggregate-demand curve, theory of liquidity preference. changes in the money supply. changes in government purchases. | Review of the previous lecture Exchange rates nominal: the price of a country’s currency in terms of another country’s currency real: the price of a country’s goods in terms of another country’s goods. The real exchange rate equals the nominal rate times the ratio of prices of the two countries. How the real exchange rate is determined NX depends negatively on the real exchange rate, other things equal The real exchange rate adjusts to equate NX with net capital outflow How the nominal exchange rate is determined e equals the real exchange rate times the country’s price level relative to the foreign price level. For a given value of the real exchange rate, the percentage change in the nominal exchange rate equals the difference between the foreign & domestic inflation rates. Review of the previous lecture Aggregate Demand and Aggregate Supply - I Instructor: Abbas Course code: ECO 400 Lecture 23 Lecture Outline Short run economic fluctuations The Basic Model of . | Review of the previous lecture Exchange rates nominal: the price of a country’s currency in terms of another country’s currency real: the price of a country’s goods in terms of another country’s goods. The real exchange rate equals the nominal rate times the ratio of prices of the two countries. How the real exchange rate is determined NX depends negatively on the real exchange rate, other things equal The real exchange rate adjusts to equate NX with net capital outflow How the nominal exchange rate is determined e equals the real exchange rate times the country’s price level relative to the foreign price level. For a given value of the real exchange rate, the percentage change in the nominal exchange rate equals the difference between the foreign & domestic inflation rates. Review of the previous lecture Aggregate Demand and Aggregate Supply - I Instructor: Abbas Course code: ECO 400 Lecture 23 Lecture Outline Short run economic fluctuations The Basic Model of Economic Fluctuations The Aggregate-Demand Curve Short-Run Economic Fluctuations Economic activity fluctuates from year to year. In most years production of goods and services rises. On average over the past 50 years, production in the . economy has grown by about 3 percent per year. In some years normal growth does not occur, causing a recession. A recession is a period of declining real incomes, and rising unemployment. A depression is a severe recession. Three Key Facts About Economic Fluctuations Economic fluctuations are irregular and unpredictable. Fluctuations in the economy are often called the business cycle. Most macroeconomic variables fluctuate together. As output falls, unemployment rises. Economic Fluctuations Short-Run Economic Fluctuations Three Key Facts About Economic Fluctuations Most macroeconomic variables fluctuate together. Most macroeconomic variables that measure some type of income or production fluctuate closely together. Although many macroeconomic variables .