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CHAPTER 19
PRICES AND OUTPUT IN AN OPEN ECONOMY:
AGGREGATE DEMAND AND AGGREGATE SUPPLY
OUTLINE
19.1 Introduction
19.2 Aggregate Demand, Aggregate Supply, and Equilibrium in a Closed Economy
19.2a Aggregate Demand in a Closed Economy
19.2b Aggregate Supply in the Long Run and in the Short Run
19.2c Short-Run and Long-Run Equilibrium in a Closed Economy
Case Study 19-1: Deviations of Short-Run Outputs from the Natural Level in the U.S.
19.3 Aggregate Demand in an Open Economy Under Fixed and Flexible Exchange Rates
19.3a Aggregate Demand in an Open Economy Under Fixed Exchange Rates
19.3b Aggregate demand in an Open Economy Under Flexible Exchange Rates
19.4 Effect of Economic Shocks and Macroeconomic Policies on Aggregate Demand
in Open Economies with Flexible Prices
19.4a Real-Sector Shocks and Aggregate Demand
19.4b Monetary Shocks and Aggregate Demand
19.4c Fiscal and Monetary Policies and Aggregate Demand in Open Economies
19.5 Effect of Fiscal and Monetary Policies in Open Economies with Flexible Prices
Case Study 19.2: Central Bank Independence and Inflation in Industrial Countries
19.6 Macroeconomic Policies to Stimulate Growth and to Adjust to Supply Shocks
19.6a Economic Policies for Growth
19.6b Economic Policies to Adjust to Supply Shocks
Case Study 19.3: Petroleum Shocks and Stagflation in the United States
Case Study 19.4: Actual and Natural Unemployment Rate, and Inflation in United States
Case Study 19.5: Actual and Natural Unemployment Rate, and Inflation in United States
Case Study 19.6: Has the U.S. Economy Become Recession Proof?
Key Terms
Aggregate demand curve (AD)
Aggregate supply curve (AS)
Long-run aggregate supply curve (LRAS)
Natural level of output (YN)
Short-run aggregate supply curve (SRAS)
Expected prices
Stagflation
Lecture Guide
1. This is not a core chapter and I would omit it in a one-semester undergraduate course in international economics.
2. If I were to cover this chapter,
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