tailieunhanh - Lecture Macroeconomics - Chapter 15: Long run macroeconomic adjustments

Chapter 15 - Long run macroeconomic adjustments. After studying this chapter you will be able to understand: To apply the long-run AD-AS model, about the inflation-unemployment relationship, about the effects of taxation on aggregate supply. | Chapter 15 Long Run Macroeconomic Adjustments SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn To apply the long-run AD-AS model About the inflation-unemployment relationship About the effects of taxation on aggregate supply Chapter 15 Topics Applying the Long-Run AD-AS Model The Inflation-Unemployment Relationship Taxation & Aggregate Supply Applying the Long-Run AD-AS Model Demand-pull inflation occurs when an increase in aggregate demand pulls up the price level Price Level Real domestic output o AS1 Demand-Pull Inflation PL1 Qf The starting point is full employment GDP (Qf ) AD1 Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 o AS1 PL1 Qf Something causes AD to increase what are some possibilities? AD1 Demand-Pull Inflation Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 Price Level Real domestic output o AS1 PL1 Qf Higher demand leads to a higher price level, and higher output AD1 PL2 AD2 Q2 . | Chapter 15 Long Run Macroeconomic Adjustments SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn To apply the long-run AD-AS model About the inflation-unemployment relationship About the effects of taxation on aggregate supply Chapter 15 Topics Applying the Long-Run AD-AS Model The Inflation-Unemployment Relationship Taxation & Aggregate Supply Applying the Long-Run AD-AS Model Demand-pull inflation occurs when an increase in aggregate demand pulls up the price level Price Level Real domestic output o AS1 Demand-Pull Inflation PL1 Qf The starting point is full employment GDP (Qf ) AD1 Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 o AS1 PL1 Qf Something causes AD to increase what are some possibilities? AD1 Demand-Pull Inflation Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 Price Level Real domestic output o AS1 PL1 Qf Higher demand leads to a higher price level, and higher output AD1 PL2 AD2 Q2 Demand-Pull Inflation Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 Price Level Real domestic output o AS1 PL1 Qf AD1 PL2 AD2 Q2 A higher price level (PL2 ) EVENTUALLY leads to higher nominal wages which causes Demand-Pull Inflation Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 Price Level Real domestic output o AS1 PL1 PL3 Qf Q2 AD2 A left shift of the short run AS curve AS2 PL2 AD1 Demand-Pull Inflation Figure 15-1 © 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 15 Price Level Real domestic output Demand-Pull Inflation in the short run, demand-pull inflation drives up prices and output in the long run, output is restored to Qf and only the price level is higher Cost-Push Inflation Cost-push inflation arises from factors that increase the cost of production at each price level o AS1 PL1 Qf Something drives up production costs such as? AD1 Cost-Push Inflation Figure 15-2 Price Level Real domestic output © 2002 .

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