《ch13 Aggregate Supply and the Equilibrium Price Level》.ppt

aggregate supply aggregate supply (AS) curve cost-push, or supply-side, inflation cost shock, or supply shock demand-pull inflation equilibrium price level inflation targeting potential output, or potential GDP stagflation R E V I E W T E R M S A N D C O N C E P T S * of 30 PART III The Core of Macroeconomic Theory ? 2012 Pearson Education, Inc. Publishing as Prentice Hall * of 30 PART III The Core of Macroeconomic Theory ? 2012 Pearson Education, Inc. Publishing as Prentice Hall Prepared by: Fernando Quijano Shelly Tefft CASE FAIR OSTER P R I N C I P L E S O F MACROECONOMICS T E N T H E D I T I O N CHAPTER OUTLINE 13 Aggregate Supply and the Equilibrium Price Level The Aggregate Supply Curve The Aggregate Supply Curve: A Warning Aggregate Supply in the Short Run Shifts of the Short-Run Aggregate Supply Curve The Equilibrium Price Level The Long-Run Aggregate Supply Curve Potential GDP Monetary and Fiscal Policy Effects Long-Run Aggregate Supply and Policy Effects Causes of Inflation Demand-Pull Inflation Cost-Push, or Supply-Side, Inflation Expectations and Inflation Money and Inflation Sustained Inflation as a Purely Monetary Phenomenon The Behavior of the Fed Targeting the Interest Rate The Fed’s Response to the State of the Economy Fed Behavior Since 1970 Interest Rates Near Zero Inflation Targeting Looking Ahead aggregate supply The total supply of all goods and services in an economy. aggregate supply (AS) curve A graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level. The aggregate supply curve is not a market supply curve, and it is not the simple sum of all the individual supply curves in the economy. Because many firms in the economy set prices as well as output, we can say an “aggregate supply curve” is really a “price/output response” curve—a curve that traces out the price decisions and output decisions of all firms in the econom