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AP Economics

AP Economics. Mr. Bernstein Module 20: Economic Policy and the Aggregate Demand-Aggregate Supply Model March 24, 2014. AP Economics Mr. Bernstein. Economic Policy and the Aggregate Demand-Aggregate Supply Model Objectives - Understand each of the following:

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AP Economics

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  1. AP Economics Mr. Bernstein Module 20: Economic Policy and the Aggregate Demand-Aggregate Supply Model March 24, 2014

  2. AP EconomicsMr. Bernstein Economic Policy and the Aggregate Demand-Aggregate Supply Model Objectives - Understand each of the following: • How the AD-AS model is used to formulate macroeconomic policy • The rationale for stabilization policy • Why fiscal policy is an important tool for managing economic fluctuations • Which policies constitute expansionary fiscal policy and which constitute contractionary fiscal policy

  3. AP EconomicsMr. Bernstein Stabilization Policies vs. Self-Correcting • Many economists believe government should enact policies to reduce the severity of recessions and limit the excesses of expansions, expediating the return to full employment and stable prices

  4. AP EconomicsMr. Bernstein Policy in the Face of Demand Shocks • Negative Demand Shock • Causes Recessionary Gap • Prices fall • Unemployment rises • Policies to increase AD • Reduces recession length • Examples? • Positive Demand Shock • Policies to combat p

  5. AP EconomicsMr. Bernstein Policy in the Face of Supply Shocks • Negative Supply Shock • Creates policy dilemma • Prices rise…and unemployment rises • Policies to increase AD • Help jobs but inflames p • Policies to reduce AD • Reduces p but hurts jobs • Difficult to influence AS

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