1 / 4

AS/AD Model

AS/AD Model. Review. AD/AS Model. AS 1. Note: Price Level = Inflation level. The AS Curve 3 phases:. (1) Flat: occurs during recessions. Unemployment is high, GDP is low. Price Level. 3. (2) Sloping Section: no recession. Unemployment is relatively low but above

hamish-mcdaniel
Télécharger la présentation

AS/AD Model

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AS/AD Model Review

  2. AD/AS Model AS1 Note: Price Level = Inflation level The AS Curve 3 phases: (1) Flat:occurs during recessions. Unemployment is high, GDP is low Price Level 3 (2) Sloping Section: no recession. Unemployment is relatively low but above the Full Employment level (4%) 2 1 (3) Vertical Section: Economy is growing too fast. Unemployment is below Full Employment (4%) (i.e. there are Too many jobs!) Real GDP Conclusion of AS: The economy has a speed limit. If it grows too fast, you will end up with inflation and no increase in GDP (section 3 of AS curve)

  3. AD/AS Model RECESSION UNEMPLOYMENT 3% GDP TOO FAST UNEMPLOYMENT 5% GDP MODERATE AS1 AD1 AD1 AD1 You draw the AD curve on 1-section of the AS curve based on the economic situation Price Level Real GDP

  4. FISCAL POLICY Expansionary fiscal policy needed AS1 Lower Taxes & ↑ Gov’t spending AD1 AD2 AD shifts right End result: higher GDP, more Jobs & slightly higher inflation Fiscal Policy will shift AD curve Economy in recession Price Level Real GDP

More Related