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Understanding Economic Growth in Macroeconomic Models

This module explores the concept of long-term economic growth within macroeconomic frameworks. It covers how long-run growth is represented in models, including the role of the Production Possibilities Curve (PPC) and the Aggregate Demand/Aggregate Supply (AD/AS) model. Key topics include the distinctions between long-term economic growth and short-term fluctuations, the characterization of long-term growth as a rightward shift in the Long-Run Aggregate Supply (LRAS) curve, and the effects of various economic growth policies.

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Understanding Economic Growth in Macroeconomic Models

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  1. AP Economics Mr. Bernstein Module 40: Economic Growth in Macroeconomic Models April 8, 2014

  2. AP EconomicsMr. Bernstein Economic Growth in Macroeconomic Models Objectives - Understand each of the following: • How long-run economic growth is represented in macroeconomic models • How to model the effects of economic growth policies

  3. AP EconomicsMr. Bernstein Long-Term Economic Growth and the PPC • Sustained rise in the quantity of goods and services an economy produces • Not ups and downs due to business cycle

  4. AP EconomicsMr. Bernstein Long-Term Economic Growth and AD/AS model • LRAS is vertical, at point of potential output • Long-Term Growth is represented by a rightward shift in the LRAS

  5. AP EconomicsMr. Bernstein Long-Term Econ Growth vs. Short-Term Fluctuations • Shift in AD or SRAS is a short-term fluctuation • Recessionary or Inflationary Gaps, and the adjustment process back to LRAS, are fluctuations in the business cycle, not Long-Term Econ Growth

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