总需求和总供给动态模型.pptVIP

* The intuition for the positive slope of DAS comes from the Phillips Curve: If output is above its natural rate, unemployment is below the natural rate of unemployment. The labor market is very “tight” and the economy is “overheating,” leading to an increase in inflation. (Of course, the unemployment rate is not explicitly included in this model, but students know from Okun’s Law that it is very tightly linked to output.) Students may find it odd to say “DAS shifts in response to changes in previous inflation,” thinking that previous inflation is fixed because the past is unchangeable. However, a change in current period inflation will become a change in next period’s previous inflation, and thus will shift next period’s DAS curve. * The derivation of the DAS curve was almost trivial. Not so for DAD. The next few slides walk students through (most of) the steps. See p.420 for more details. * * The notation “A” and “B” for the coefficients in the DAD equation is not in the textbook. I have introduced it here for two reasons. First, the equation would otherwise be too long to fit on the slide. Second, the notation makes it easy for students to see the relationship between output, inflation, and the demand shock. In general, the notation makes the DAD equation less intimidating and easier to work with. * * The vertical line drawn at Ybar is shown for reference: it allows us to see the gap between current output and its natural level, which, in turn, influences how the economy will evolve over subsequent periods. * This slide presents the experiment described on pp.423-424 of the text. Since this experiment concerns the long run, it is best to think of periods t and t+1 as representing decades rather than years. See the DAD and DAS equations to verify that the horizontal distance of the shifts in both curves are equal. To see that inflation remains unchanged in the new long-run equilibrium, refer to the model’s long-run solution value