Chapter 2-: Aggregate Demand and Aggregate Supply

As output falls,
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AD Curve Might Shift Because...- Changes in consumption, C - Changes in investment, I - Changes in government purchases, G - Changes in net exports, NXAn increase in consumer spending shifts AD to the ...RightEvents that change how much people want to consume at a given price level• Changes in taxes, wealthEvents that change how much firms want to invest at a given price levelBetter technology • Tax policy • Money supplyAn increase in investment will shift AD to the ...rightAn increase in government purchases will shift AD to the ...rightEvents that change net exports for a given price levelRecession in Europe • International speculators - change in exchange rateAn increase in net exports will shift AD to the ...rightA shift in AD occurs whenPeople take different actions at the same price level due to something like a boom or a recession.long-run determinants of GDPSupplies of labor, capital, and natural resources • Available technology• The LRAS curve might shift:-Any change in natural level of output - Changes in labor - Changes in capital - Changes in natural resources - Changes in technological knowledge