Bài giảng Macro - Chapter 9 Aggregate Demand and Aggregate Supply

Chapter 9Aggregate DemandandAggregate SupplySLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE1In this chapter you will learnWhy the aggregate demand curve is downward sloping, and what factors shift the entire curveWhat determines the shape of the short run aggregate supply curve, and what factors shift the entire curveHow the equilibrium price level and real GDP are determined2In this chapter you will learnThe distinction between the short-run and long-run supply curveThe nature and causes of recessionary and inflationary gaps3Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP4The amounts of real output that buyers collectively desire to purchase at each possible price levelAggregate Demand (AD):AD = C + Ig + G + Xn5Aggregate Demand (AD)Aggregate Quantity Demanded (Real GDP) and the Price Level are inversely related as follows: Price LevelReal GDPADFigure 9 - 16...is downsloping because of the following effects of a change in price level: 1 - Real-balances Effect 2 - Interest-rate Effect 3 - Foreign Trade EffectAggregate Demand (AD)Remember: these effects are caused by price level changes70Price levelReal domestic output, GDPCHANGES IN AGGREGATE DEMANDAD1AD Can IncreaseFigure 9 - 2© 2002 McGraw-Hill Ryerson Ltd. 8Macroeconomics, Chapter 980CHANGES IN AGGREGATE DEMANDAD1AD2AD Can Increaseshift RIGHTFigure 9 - 2© 2002 McGraw-Hill Ryerson Ltd. 9Macroeconomics, Chapter 9Price levelReal domestic output, GDP90CHANGES IN AGGREGATE DEMANDAD1AD Can DecreaseFigure 9 - 2© 2002 McGraw-Hill Ryerson Ltd. 10Macroeconomics, Chapter 9Price levelReal domestic output, GDP100CHANGES IN AGGREGATE DEMANDAD1AD3AD Can Decreaseshift LEFTFigure 9 - 2© 2002 McGraw-Hill Ryerson Ltd. 11Macroeconomics, Chapter 9Price levelReal domestic output, GDP11Consumer SpendingConsumer wealthConsumer expectationsHousehold indebtednessTaxesDeterminants of Aggregate Demand12Determinants of Aggregate DemandInvestment SpendingReal Interest RatesExpected ReturnsExpectations about future business conditionsTechnologyDegree of excess capacityBusiness taxes13Government SpendingNet Export SpendingNational Income AbroadExchange RatesDeterminants of Aggregate Demand14Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP15The level of real domestic output that will be produced at eachprice level, given fixed input pricesAggregate Supply (Short Run):16 ...has three ranges: 1 - Horizontal Range 2 - Vertical Range 3 - Intermediate (Upsloping) RangeAggregate Supply (Short Run)17Price levelReal domestic output, GDPQPLAGGREGATE SUPPLY CURVE (AS)VerticalRangeHorizontalRangeUpsloping orIntermediateRangeQfFigure 9 - 5© 2002 McGraw-Hill Ryerson Ltd. 18Macroeconomics, Chapter 918Real domestic output, GDPQPLAS1Price levelChanges in Aggregate SupplyAS can decreaseFigure 9 - 6© 2002 McGraw-Hill Ryerson Ltd. 19Macroeconomics, Chapter 919Real domestic output, GDPQPLAS1AS2shift LEFTPrice levelChanges in Aggregate SupplyAS can decreaseFigure 9 - 6© 2002 McGraw-Hill Ryerson Ltd. 20Macroeconomics, Chapter 920Real domestic output, GDPQPLChanges in Aggregate SupplyAS1Price levelAS can increaseFigure 9 - 6© 2002 McGraw-Hill Ryerson Ltd. 21Macroeconomics, Chapter 921Real domestic output, GDPQPLAS1AS3shift RIGHTPrice levelChanges in Aggregate SupplyAS can increaseFigure 9 - 6© 2002 McGraw-Hill Ryerson Ltd. 22Macroeconomics, Chapter 922Determinants of Aggregate SupplyInput PricesDomestic Resource AvailabilityLandLabourCapitalEntrepreneurial abilityPrices of Imported ResourcesMarket Power23Productivityproductivity = total output/total inputsLegal-Institutional EnvironmentBusiness Taxes & SubsidiesGovernment RegulationDeterminants of Aggregate Supply24Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP25EQUILIBRIUM GDPEquilibrium GDP and Equilibrium Price Level occur where AD =ASWhy?A price level too low would mean AD>AS, putting upward pressure on prices across the economy26Price Level Too LowADASPriceLevelRealGDPPL1AS1AD1Figure 9 - 727EQUILIBRIUM GDPsimilarly, a price level too high would mean AD<AS, putting downward pressure on prices across the economy28ADASPriceLevelRealGDPPL2AS2Price Level Too HighFigure 9 - 7AD229Changes in EquilibriumAre caused by changes (shifts) in AD and/or ASThe effects on real GDP and the price level depend on the AS range30The Multiplier withPrice Level ChangesASReal domestic output, GDPGDP0AD0PL1from this starting pointwe will examinethree equal horizontalshifts in ADPrice Level© 2002 McGraw-Hill Ryerson Ltd. 31Macroeconomics, Chapter 931ASAD1Real domestic output, GDPGDP0AD0FullMultiplier}PL1GDP1Price LevelThe Multiplier withPrice Level Changes© 2002 McGraw-Hill Ryerson Ltd. 32Macroeconomics, Chapter 932AD1ASReal domestic output, GDPAD2GDP0GDP2AD0ReducedMultiplier}PL1PL2FullMultiplier}GDP1Price LevelThe Multiplier withPrice Level Changes© 2002 McGraw-Hill Ryerson Ltd. 33Macroeconomics, Chapter 933GDP2AD1ASPL1AD2GDP0GDP2=GDP3AD0ZeroMultiplier:GDP is unchangedwhen AD shiftsAD3PL3ReducedMultiplier}FullMultiplier}GDP1PL2Real domestic output, GDPPrice LevelThe Multiplier withPrice Level Changes© 2002 McGraw-Hill Ryerson Ltd. 34Macroeconomics, Chapter 934The Multiplier with Price Level ChangesPrice Level increases will reduce the multiplier effect on equilibrium GDP (the AD shift remains the same)The largest GDP multiplier effect will occur in the horizontal range of ASIn the vertical range of AS, the GDP multiplier is zero35Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP36Aggregate Supply RevisitedShort Run: Period while input prices remain fixed as the price level changes (particularly nominal wages)Long Run: Period long enough for input prices (wages) to be fully responsive to changes in the price levelWe have assumed the short run up to this point37Price LevelReal GDPoAS1Short Run Aggregate SupplyPL1QfThe startingpoint is fullemploymentGDP (Qf )AD1© 2002 McGraw-Hill Ryerson Ltd. 38Macroeconomics, Chapter 938Price LeveloAS1Short Run Aggregate SupplyPL1QfHigher demandleads to ahigher price level & greater outputAD1AD2PL2Q2© 2002 McGraw-Hill Ryerson Ltd. 39Macroeconomics, Chapter 9Real GDP39Price LeveloAS1PL1PL2QfQ2AD2A higher pricelevel (PL2 ) EVENTUALLYleads to highernominal wageswhich causes....Long Run Aggregate SupplyAD1© 2002 McGraw-Hill Ryerson Ltd. 40Macroeconomics, Chapter 9Real GDP40Price LeveloAS1PL1QfQ2AD2Long Run Aggregate SupplyA left shift ofthe short runAS curveAS2PL3PL2AD1© 2002 McGraw-Hill Ryerson Ltd. 41Macroeconomics, Chapter 9Real GDP41Long Run Aggregate Supplyat this point, real wages are restoredin the long run, output is restored to Qfbut the price level is higher42Price LeveloPL4Q4AS1Short Run Aggregate SupplyPL1QfA reductionin AD bringsabout a lowerprice level andlower outputAD1AD3© 2002 McGraw-Hill Ryerson Ltd. 43Macroeconomics, Chapter 9Real GDP43Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyA lower pricelevel EVENTUALLYleads to lowernominal wageswhich causes....AD3PL4Q4© 2002 McGraw-Hill Ryerson Ltd. 44Macroeconomics, Chapter 9Real GDP44Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD3PL4Q4A right shift ofthe short runAS curvePL5AS3© 2002 McGraw-Hill Ryerson Ltd. 45Macroeconomics, Chapter 9Real GDP45Long Run Aggregate Supplyat this point, real wages have fallen to former real levelsin the long run, output is restored to Qfbut the price level is lowerthis process can take a long time46Long Run Aggregate Supplyby tracing a line between the long-run equilibrium points, we obtain the long-run aggregate supply curveillustrated47Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyStart with full employment© 2002 McGraw-Hill Ryerson Ltd. 48Macroeconomics, Chapter 9Real GDP48Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyPL4AD2PL2Increase in ADleads to higheroutput & pricelevelQ2© 2002 McGraw-Hill Ryerson Ltd. 49Macroeconomics, Chapter 9Real GDP49Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL2Eventually,wages & input prices are bidupQ2© 2002 McGraw-Hill Ryerson Ltd. 50Macroeconomics, Chapter 9Real GDP50Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL2Economy cannot remain above Qfin the long runQ2© 2002 McGraw-Hill Ryerson Ltd. 51Macroeconomics, Chapter 9Real GDP51Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3© 2002 McGraw-Hill Ryerson Ltd. 52Macroeconomics, Chapter 9Real GDPAlternatively...52Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL4Q3Decrease in ADleads to loweroutput & pricelevel© 2002 McGraw-Hill Ryerson Ltd. 53Macroeconomics, Chapter 9Real GDP53AS3Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL4Q3Eventually,wages & input prices fallPL5© 2002 McGraw-Hill Ryerson Ltd. 54Macroeconomics, Chapter 9Real GDP54AS3Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL4Q3PL5Economy cannot remain below Qfin the long run© 2002 McGraw-Hill Ryerson Ltd. 55Macroeconomics, Chapter 9Real GDP55AS3Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL5Long run aggregate supplycurve is vertical at thefull employment level© 2002 McGraw-Hill Ryerson Ltd. 56Macroeconomics, Chapter 9Real GDP56AS3Price LeveloAS1PL1QfAD1Long Run Aggregate SupplyAD2AS2PL3PL5ASLR© 2002 McGraw-Hill Ryerson Ltd. 57Macroeconomics, Chapter 9Real GDP57Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP58Equilibrium GDPThere is no guarantee, in the short run, that equilibrium GDP will be full-employment GDP59Recessionary GapA recessionary gap occurs when AD is too low, and equilibrium GDP is below potential GDP60Price levelReal GDPRecessionary GapASAD1490AD0510RecessionaryGap = 20PotentialGDPFigure 9 - 10P0P1© 2002 McGraw-Hill Ryerson Ltd. 61Macroeconomics, Chapter 961Inflationary GapAn inflationary gap occurs when AD is too high, and equilibrium GDP is above potential GDP62Price levelInflationary GapASAD2530AD0510PotentialGDPInflationaryGap = 20Figure 9 - 10P0P1© 2002 McGraw-Hill Ryerson Ltd. 63Macroeconomics, Chapter 9Real GDP63Chapter 9 TopicsAggregate Demand Aggregate Supply: The Short RunEquilibrium: Real Output & the Price LevelShort-Run & Long-Run Aggregate SupplyEquilibrium vs Full-Employment GDP64Chapter 9 AppendixAggregate DemandandAggregate SupplySLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE65Derivation of AD CurveAD can be derived from the Aggregate Expenditures Modelillustrated66Aggregate expenditures(billions of dollars)00Price levelP11(C a + I g + X n + G) 1 at P 11'GDP1GDP1Real GDP atprice level 1Figure A9 - 1Real GDP Real GDPWhat ifprices goup?© 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 967Real GDPReal GDP00GDP1GDP1P1(C a + I g + X n + G) 1 at P 111'P2GDP2GDP2(C a + I g + X n + G) 2 at P 222'A Lower RealGDP at price level 2Aggregate expenditures(billions of dollars)Price levelWhat if prices go up again?Figure A9 - 1© 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 96800GDP1GDP1P1(C a + I g + X n + G) 1 at P 111'P2GDP2GDP2(C a + I g + X n + G) 2 at P 222'(C a + I g + X n + G) 3 at P 33P33'A Still LowerReal GDP Levelat pricelevel 3Aggregate expenditures(billions of dollars)Price levelGDP3GDP3Real GDPReal GDPFigure A9 - 1© 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 96900GDP1GDP1P1(C a + I g + X n + G) 1 at P 111'P2(C a + I g + X n + G) 2 at P 222'(C a + I g + X n + G) 3 at P 33P33'Aggregate Demandcan be derived from AE Aggregate expenditures(billions of dollars)Price levelGDP2GDP2GDP3GDP3Real GDPReal GDPFigure A9 - 1© 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 970Shifts in ADand shifts in Aggregate Expenditureillustrated7100GDP1GDP1P1GDP2GDP2AE1 at P 1AE2 at P 1An Increasein AggregateExpendituresAD1An Increase inAggregate DemandAD2Aggregate expenditures(billions of dollars)Price levelFigure A9 - 2Real GDPReal GDP© 2002 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 972