1. Short quiz
1. Draw a correctly labeled SRAS/SRAD and LRAS
graph
2. What should happen to the economy if SRAD
decreases, like it did in the Great Depression.
3. Stagflation in the 1970s was a decrease in SRAS.
Make the change on your graph. What were the
two bad effects of stagflation?
2. A supply question
Long run: aggregate supply
Factors of production:
Land:
Resources, how hard to get
Labor:
population
Human capital
Health
Capital:
Technology
productivity
How else have we
sketched this?
Klein, do it on board
3. So then LRAS must be…
• http://stats.oecd.org/Index.aspx?DatasetCode
=LEVEL
• LRAS = PPF = full employment
4. 24%
93%
0 (391 is best)
4.8 %
93%
1 (UNAM)
Unemployment
Literacy Rate
Top 50 univ
5. On our SRAD/SRAS graph
Stock market crash spooks investors
Draw short run changes, back to LR though
Cyclical unemployment
Structural unemployment?
INVISIBLE
HAND WILL
FIX IT
6. On our SRAD/SRAS graph
Population boom 1950s
Draw short run changes
INVISIBLE
HAND WILL
FIX IT
7. On our SRAD/SRAS graph
New technology for firms to build goods
Draw changes
INVISIBLE
HAND WILL
FIX IT
8. On our SRAD/SRAS graph
Housing “bubble” of 2000’s
Draw changes
INVISIBLE
HAND WILL
FIX IT
9. Other “Great Depressions” in US
• Panics
• 1797
• 1815-1821
• 1873
• 1893
• 1907
• Classical response…..
• Karl Marx watched
and commented
QE Assignment:
Small timeline of these
recessions for my wall.
Dates, cause, life
during, picture
10. Aggregate Demand Changes Assignment
• Changes to Aggregate Demand
• Pages 729-730
• Choose:
• For each shift of AD curve, explain, give
example of left and right by drawing a picture,
sketch graphs (small poster for wall)