AP Economics Mr. Bernstein Macro Graphs Review May 2014.

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Presentation transcript:

AP Economics Mr. Bernstein Macro Graphs Review May 2014

The Production Possibilities Curve 2 AP Economics Mr. Bernstein

Economic Growth Concave due to “Law of increasing opportunity costs” 3 AP Economics Mr. Bernstein

Circular Flow Diagram 4 AP Economics Mr. Bernstein

Expanded Circular Flow Diagram 5 AP Economics Mr. Bernstein

Factors Influencing Investment Spending Reduction in Real Interest Rates increases investment demand Increase in Expected Future GDP or in Production Capacity shifts demand curve 6

AP Economics Mr. Bernstein Money Market Assumes fixed MS; Y axis is Nominal Rates 7

AP Economics Mr. Bernstein Loanable Funds Market Supply is upward sloping; Y axis is Real Rates 8

AP Economics Mr. Bernstein Contractionary Monetary Policy and Rates Fed sells securities, rates rise 9

AP Economics Mr. Bernstein Contractionary Monetary Policy & the Economy Increases in rates leads to decrease in Investment, AD 10

AP Economics Mr. Bernstein Long-Run Macroeconomic Equilibrium Returns to LRAS via shift in SRAS 11

AP Economics Mr. Bernstein Short-Run and Long-Run Effects of Increase in MS Short-run shift in AD offset by shift in SRAS LRAS does not shift; only P increases 12

AP Economics Mr. Bernstein Short-Run Phillips Curve Tradeoff between inflation and unemployment 13

AP Economics Mr. Bernstein Long-Run Phillips Curve LRPC = Natural Rate of Unemployment 14

AP Economics Mr. Bernstein Exchange Rates Labeling: think “bottom/bottom” 15