Unit 2: Introduction to Macroeconomics

Lesson 12b: The AD/AS Model - AS and Equilibrium in the Macro-Economy
(UE, IN, and EG)

Outcomes - What you should learn

TOPICS

Aggregate Supply (AS) and its Determinants

Macroeconomic Equilibrium

- Changes in AD and what happens to UE, IN, and EG
- Changes in AS and what happens to UE, IN, and EG
- Changes in both AD and AS and what happens to UE, IN, and EG

OUTCOMES

Define, draw, and describe the shape of the immediate short-run, short-run, and long-run AS curves, and understand the determinants of the short-run AS curve
[Define, Draw, Describe, Determinants]

Find an economy's equilibrium price level and real domestic output using AD/AS graph

Explain using an AD/AS graph what happens to RDO, the price level, UE, IN, and EG when there is a change in AD and/or AS.

Explain the ratchet effect and demand pull inflation

Explain cost-push inflation and stagflation

Two (or three) definitions of economic growth

IN THE NEWS -Use the AS/AD model to explain what might happen to UE, IN, and EG following these events in the news:

- 2003: "the recently-signed tax-cut plan, which will give rebate checks to families with children in late summer, right in time for back-to-school spending"

- 2003: "improving consumer confidence -- critical, since consumer spending makes up more than two-thirds of the economy"

- 2003: "The Commerce Department's report last week of a surprising August improvement in the international trade balance "

- 2009: "Personal spending jumped 1.3% last month, the government said."

- 2011: "With energy prices already well on the rise before the latest crisis hit the Middle East and North Africa, is the global economy headed for another tumble?

How can an economy go beyond the full employment level of output?

 

HOME

Lesson 12b