Macroeconomics Syllabus 3.3

Macroeconomics Macroeconomic models: You need to understand: Aggregate demand—components Aggregate supply short-run long-run (Keynesian versus neo-classical approach) Full employment level of national income Equilibrium level of national income Inflationary gap Deflationary gap Diagram illustrating trade/business cycle

Macroeconomics List and the explain the generally accepted macroeconomic goals of an economy

Macroeconomics Explain what is meant by aggregate Look at the two diagrams comparing Aggregate Demand and Aggregate Supply – note the differences When drawing AD and AS you must get the labelling exactly right.

Macroeconomics Building the AD and AS diagram (Model) Define AD using these words: amount given The in an of economy a planned over period expenditure time total NB AD is not just the micro definition!

Macroeconomics What are the components of AD? Referring back to the circular flow rearrange this equation so that it accurately reflects AD = I+Y-M+G+X+C

Macroeconomics Explain each component of Aggregate Demand Draw and Aggregate Demand curve (labelled properly) Justify why it must slope downwards What cause shifts of the AD curve?

Macroeconomics Define Aggregate Supply Draw the Aggregate Supply curve What is the difference between Short Run and Long Run? Justify why it slopes upwards What shifts the Aggregate Supply?

Macroeconomics Long Run Aggregate Supply (controversial) What does Neo-classical mean? Justify why the neo-classical curve is perfectly inelastic at capacity What would shift the position of the neoclassical Long Run Aggregate Supply curve?

Macroeconomics Draw a keynesian LRAS Justify why it is horizontal for part of the curve Why does it then slope upwards until horizontal?

Macroeconomics The end