Aggregate Demand- Aggregate Supply

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Presentation transcript:

Aggregate Demand- Aggregate Supply

r Ms AE Y=AE AE r* r*** r** Md M Y M* M** Y* Y Y** P AS P** Overall: Increase MS from M* to M** Decrease r* to r*** Increase Y* to full employment Y Increase Prices from P* to P** P* AD Y Y* Y Y**

Historical Recessions 1973 Oil Embargo Quadrupling of oil prices (Negative Supply Shock) Spending on War Positive Demand Shock Stock market crash Negative Demand Shock Which shock drove the recession?

Historical Recessions Small recession in 1979 due to energy crisis Iran limited oil exports, increasing price Negative Supply Shock Savings and Loan Crisis Problems in the mortgage market Negative Demand Shock What was the overall outcome?

Historical Recessions 1990 Oil Price Increase (Negative Supply Shock)

Historical Recessions Dot-Com Bubble 9/11 Attacks Both (Negative Demand Shocks) Expectation?

Great Recession Housing Market Crash

Great Depression

Great Depression