Unit 2C: Aggregate Demand & Aggregate Supply

It is now time to add a little more reality to our model of the Aggregate Economy (but not too much reality). In the AD-AS model we will add back the price level. We will now look at what impact changes in Aggregate Expenditures will have not just on output (Real GDP) but how will impact inflation!

Study Tools

Online Textbook Resources

Unfortunately, due to the age of the textbook, the publisher has removed all online content associated with our textbook. While we will use the book as an important source, the links given therein are no loner functioning. As a result, I will look online for other sources related to the topics in our text. Likewise, I encourage you to let me know of any useful websites that you come across in your studies so that I may add them to the site and share with everyone.

Course Notes

Online notes/summary of the McConnell & Brue 15th edition.

• Chapter 11: Aggregate Demand and Aggregate Supply
• Chapter 16: Extending the Analysis of Aggregate Supply

Vocabulary

Link to Quizlet! Vocabulary is the key to understanding any subject. Once you can break down the barrier of language the ideas and concepts are wide open. Here you can find the vocabulary for the unit to practice by using online flash cards and by practicing online generated vocabulary quizzes.

Chapter 11: Aggregate Demand and Aggregate Supply

Chapter 16: Extending the Analysis of Aggregate Supply

Videos

Video Link: Learner.org

• Economics U$A: Stagflation

  Nearly 30 minutes, this video analyzes the economic problem of the 1970s where unemployment was accompanied by high rates of inflation and the change of philosophy from focusing entirely on the Aggregate Demand side to the Aggregate Supply side.

  From the website, 1970s America saw a new kind of inflation, based on supply and not demand: "stagflation," caused by Arab oil embargoes and worldwide crop failures. In 1973 President Ford and Fed Chairman Arthur Burns tried to control inflation by choking the money supply. They failed. In the 1990s the U.S. had three ways to ease inflation: Technological innovation, market globalization, and expenditure restraint. Demand management policies fight cost-push inflation only by causing extremely high unemployment, and rising inflation and rising unemployment can parallel each other.

  If the video window does not pop up, in the windown that opens, scroll down to the title "22. Stagflation" and click the "VoD" icon on the right.

Copyright M. Caggia 2014