Ch1920 AD SHEET

1
Ch19-20 AD SHEET

• Three situations

2
AD-AS...One LAST TIME
3
AD-AS ANALYSIS -Starting Point
Price Level
AS (2)
LRAS
a
Pa
AD
Qa
Real GDP
4
CASE 1 A DROP IN AD
5
AD-AS ANALYSIS AD FALL-Something Causes AD to
Drop
Price Level
AS (2)
a
Pa
b
Pb
AD
Qa
Real GDP
Qb
6
AD-AS ANALYSIS AD FALL Fed increases money
supply
Price Level
AS (2)
Monetary Policy MS r I
a
Pa
b
Pb
AD
Qa
Real GDP
Qb
7
AD-AS ANALYSIS AD FALL Congress Raises G or Cuts
T
Price Level
AS (2)
Fiscal Policy G T
C I
a
Pa
b
Pb

AD
Qa
Real GDP
Qb
8
AD-AS ANALYSIS AD FALL Economy left to itself to
recover
Price Level
AS (2)
AS (0)
a
Pa
b
Pb
c
AD
Qa
Real GDP
Qb
9
AD-AS ANALYSIS AD FALL Economy left to itself to
recover
Price Level
AS (2)
LRAS
AS (0)
a
Pa
b
Pb
c
AD
Qa
Real GDP
Qb
10
CASE 2 A SURGE IN AD
11
AD-AS ANALYSIS -Starting Point
Price Level
AS (2)
LRAS
a
Pa
AD
Qa
Real GDP
12
AD-AS ANALYSIS Economy Begins to Overheat
Price Level
AS (2)
b
Pb
a
Pa
AD
Real GDP
Qb
Qa
13
AD-AS ANALYSIS Fed tightens credit
Price Level
AS (2)
b
Pb
Monetary Policy MS r I
a
Pa
AD
Real GDP
Qb
Qa
14
AD-AS ANALYSIS Congress cuts G or raises T
Price Level
AS (2)
b
Fiscal Policy G T
C I
Pb
a
Pa
AD
Real GDP
Qb
Qa
15
AD-AS ANALYSIS Economy Adjusts By Itself
Price Level
AS (6)
AS (2)
c
Pc
b
Pb
a
Pa
AD
Real GDP
Qb
Qc
16
CASE 3AS SHIFTS LEFT --- Stagflation
17
AD-AS ANALYSIS -Starting Point
Price Level
AS (2)
LRAS
a
Pa
AD
Qa
Real GDP
18
AD-AS ANALYSIS Stagflation Due to Oil Price Rise
Price Level
AS (2)
AS (6)
b
Pb
a
Pa
AD
Qa
Real GDP
Qb
19
AD-AS ANALYSIS Fed Fights Unemployment
Price Level
AS (2)
AS (6)
Pc
c
b
Pb
Monetary Policy MS r I
a
Pa
AD
Qa
Real GDP
Qb
20
AD-AS ANALYSIS Congress Fights Unemploy.
Price Level
AS (2)
AS (6)
Pc
c
Fiscal Policy G T
C I
b
Pb
a
Pa

AD
Qa
Real GDP
Qb
21
AD-AS ANALYSISStagflation Economy Adjusts By
Itself
Price Level
AS (2)
AS (6)
b
Pb
a
Pa
AD
Qa
Real GDP
Qa