Unit 2: Introduction to Macroeconomics

Lesson 12c: The AD/AS Model - Stabilization Policies and AS/AD in the Long Run

Introduction

 

Now that we have a tool to use to better understand what causes changes in UE, IN, and EG, let's look at what the government can do to reduce high UE and high IN. What are the government POLICIES that can reduce UE and reduce IN?

Luckily, this is one concept where the terminology used by economists is also used by everybody else. So when you read about "fiscal policy" and "monetary policy" in your textbook and in the newspaper, they mean the same thing!

We will finish this lesson with a review of the economic history of United States. You have all heard about the "Great Depression" (1929-1939). Let's see if we can use what we have learned (the AD/AS model) to better understand its causes and why it ended.

 

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Lesson 12c