Chap_31Aggregate Demand and Aggregate Supply(曼昆微观经济学-

Aggregate Demand and Aggregate SupplyChapter 31

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 U.S. economy has grown by about 3 percent per year. In some years normal growth does not occur, causing a recession.

Short-Run Economic Fluctuations A

recession is a period of declining real GDP, falling 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.

A Look At Short-Run Economic Fluctuations(a) Real GDP Billions of 1992 Dollars $7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500Recessions

Real GDP

1965

1970

1975

1980

1985

1990

1995

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 fluctuate together, they fluctuate by different amounts.

A Look At Short-Run Economic Fluctuations(b) Investment Spending Billions of 1992 Dollars $1,100 1,000 900 800 700 600 500 400 300 1965 1970 1975 1980Recessions

Investment spending

1985

1990

1995

Three Key Facts About Economic Fluctuations As output falls, unemployment rises.Changes in real GDP are inversely related to changes in the unemployment rate. During times of recession, unemployment rises substantially.

A Look At Short-Run Economic Fluctuations(c) Unemployment Rate Percent of Labor Force 12 10 8Unemployment rateRecessions

64 2 0 1965 1970 1975 1980 1985 1990 1995

How the Short Run Differs From the Long Run Most

economists believe that classical theory describes the world in the long run but not in the short run. Changes

in the money supply affect nominal variables but not real variables in the long run. The assumption of monetary neutrality is not appropriate when studying year-toyear changes in the economy.

The Basic Model of Economic Fluctuations Two variables are used to develop a

model to analyze the short-run fluctuations. The

economy’s output of goods and services measured by real GDP. The overall price level measured by the CPI or the GDP deflator.

The Basic Model of Economic FluctuationsEconomist use the model of aggregate demand and aggregate supply to explain short-run fluctuations in economic activity around its long-run trend.

The Basic Model of Economic Fluctuations The

aggregate demand curve shows the quantity of goods and services that households, firms, and the government want to buy at each price level.

The Basic Model of Economic Fluctuations The

agg

regate supply curve shows the quantity of goods and services that firms produce and sell at each price level.

Aggregate Demand and Aggregate Supply...Price Level Aggregate supply

Equilibrium price level

Aggregate demand 0Equilibrium output

Quantity of Output

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

P11. A decrease in the price level...

P2Aggregate demand 0

Y1

Y2

2. …increases the quantity of goods and services demanded.

Quantity of Output

Why the Aggregate Demand Curve Is Downward Sloping The

Price Level and Consumption: The Wealth Effect The Price Level and Investment: The Interest Rate Effect The Price Level and Net Exports: The Exchange-Rate Effect

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.