AGGREGATE DEMAND

SLOPE (Downward) 1.- Wealth effect (Pup, Cdown) because the Money has less value SHIFTS CHANGES IN C EXAMPLES 1.- Stock market boom/crash 2.- Consumer Preferences (spending vs saving) 3.- Consumer confidence 4.- Tax hikes/cuts 5.- Transfer payments to people (not considered Government spending, but increase peoples income social security, welfare) 6.- government policy increasing the use of rebates 1.- An investment on physical capital 2.- An investment on inventory 3.- A change in the interest rate not caused by prices increase. (which only causes a movement along the curve) 4.- Tax Credit or tax incentives 5.- Investors expectations/confidence 1.- Federal spending (e.g. defense) 2.- Provincial and municipal spending (roads & schools) 3.- Government purchases 1.- A change in the value of net exports 2.- Foreign demand for a countrys goods and services 3.- An increase in foreign incomes 4.- booms/recessions in countries that buy our products 5.- Speculation in foreign exchange market (appreciation, depreciation) 6.- New trade policies. Affect all of the above.

2.- Interest rate effect (Pup, Idown) because interest rates go up.

CHANGES IN I

3.- Exchange rate effect (Pup, NX down) because CAD appreciates (higher interest rates for Canadian bonds)

CHANGES IN G

CHANGES IN NX

FISCAL OR MONETARY POLICIES

LRAS
SLOPE (Vertical) Yn is determined by the economys stocks of labour, capital, natural resources and technology. An increase in P does not affect any of these, so it does not affect Yn SHIFT Changes in L (or natural rate of unemployment) EXAMPLES 1.- immigration and population growth 2.- Baby boomers retire 3.- Government policies reduce natural U-rate 1.- investment in factories, equipment. 2.- Factories destroyed by a hurricane. 3.- Net investment = Gross investment Replacement investment) . Therefore, even if the investment falls, if net investment is still positive, the curve will not move leftward. 4.- inward investment 1.- More people getting college degrees. 2.- More education and training. 1.- Discovery of new mineral deposits 2.- Reduction in supply of imported oil 3.- Changing weather patterns that affect agricultural production 1.- Productivity improvements from technological progress. 2.- Changes in the spending level on technology

Changes in K (capital)

Changes in H (Human Capital)

Changes in Natural resources (land)

Changes in Technology

Competition in product and labour markets, which improves efficiency and productivity Improvement in the quality of resources.

SRAS
SLOPE (it is Upward sloping) An increase in P causes an increase in the quantity of g & S supplied. SHIFT (thing about EXAMPLES profitability and productivity) Changes in L (or natural rate 1.- immigration and of unemployment) population growth 2.- Baby boomers retire 3.- Government policies reduce natural U-rate 4.- Changes in wage costs. (changes in costs of production) Changes in K (capital) 1.- investment in factories, equipment. 2.- Factories destroyed by a hurricane. 3.- Net investment = Gross investment Replacement investment) . Therefore, even if the investment falls, if net investment is still positive, the curve will not move leftward. 4.- inward investment 5.- Changes in import prices 6.- Changes in raw material prices (changes in costs of production) 7.- Changes in price of components (changes in costs of production) 8.- tariffs and quotas Changes in H (Human Capital) 1.- More people getting college degrees. 2.- More education and training. 1.- Discovery of new mineral deposits 2.- Reduction in supply of imported oil 3.- Changing weather patterns that affect agricultural production 4.- Change of energy prices. 1.- Productivity improvements from technological progress.

If SRAS slopes up, then shifts in AD do affect output and employment.

THEORIES OF SRAS (P VS PE) (some type of market imperfection)

Changes in Natural resources (land)

1.- The sticky wage theory (NOMINAL wagesare sticky in the short run)

Changes in Technology

2.- Changes in the spending level on technology 2.- The sticky price theory 3.- The misperceptions theory
Competition in product and labour markets, which improves efficiency and productivity Improvement in the quality of resources. Changes in taxes that business have to pay (affect their profitability) Business subsidies

QUIZZ ABOUT AGGREGATE SUPPLY http://www.tutor2u.net/economics/quizzes/as/aggregatesupply1/quiz.html

QUIZZ ABOUT AD http://www.reffonomics.com/TRB/chapter24/aggregatedemandsupplygraph.html