AD+&AS

2.2 Aggregate Demand and Aggregate Supply







 Determinants of AD video:

Components of AD in more detail:

 

 media type="custom" key="8555878"

 SRAS Video:

Student Activity: 

media type="youtube" key="sSjg1tUBgbQ" width="560" height="315"

=Macroeconomic Equilibrium: = Equilibrium is where AD=AS. But where will this be? Can it be below full employment (deflationary gap) or above full employment (Inflationary Gap), or will it always be at full employment? This is a tough topic for many students and you do need to understand the differences between the keynesian perspective and the Classical perspective. In reality it comes down to the basic question "Do you believe that the long run equilibrium for the economy can be below its' full employment level?" There is no disagreement between economists as to the short run equilibrium- how could there be- clearly the fact that there are recessions is empirical evidence that this can happen. But Classical economists argue that this is not a long run equilibrium as factor prices will fall (workers will "price themselves back into the labour market") and so the long run equilibrium is always at full employment. Keynesians on the other hand argue that "wages may be sticky downwards" and so the long run equilibrium may remain significantly below full employment. ===<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Now go to your textbooks and/or other sources and do some background reading and research on this. What do you believe??? ===

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">media type="youtube" key="rGy6sC3q-r4" width="420" height="315"

media type="youtube" key="-iw-brl29bw" width="420" height="315"

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Extension Video on Keynesian thinking on macroeconomic equilibrium <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">media type="youtube" key="hPkh8kOldU4" width="424" height="327" align="left"

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Homework: watch this video on the great depression]

media type="custom" key="25980442"

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">In-Class Student Activity <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Gap fill exercise

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px; line-height: 0px; overflow-x: hidden; overflow-y: hidden;">

What evidence is there that economies move back to full employment in the LR?

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 18px;">[|Supply side policy notes]

[[file:Macroeconomics Objectives and Aggregate Supply and Demand Multiple Choice Questions.pdf]]
media type="custom" key="25957248"

HL Content
The Multiplier media type="youtube" key="dOWX_SFf9KY" width="420" height="315"

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px; line-height: 0px; overflow: hidden;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 18px;">[|Applied examples of the multiplier]

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|And remember that the multiplier can work in both directions. Here is a great article on the downwards multiplier effect]

[]

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">More multiplier worked examples

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">