1. Economic Growth in Macroeconomic Models
AP Economics
Mr. Bernstein
Module 40:
Economic Growth in Macroeconomic Models
March 2017

2. AP Economics Mr. Bernstein
Economic Growth in Macroeconomic Models
Objectives - Understand each of the following:
How long-run economic growth is represented in macroeconomic models
How to model the effects of economic growth policies

3. AP Economics Mr. Bernstein
Long-Term Economic Growth and the PPC
Sustained rise in the quantity of goods and services an economy produces
Not ups and downs
due to business cycle

4. AP Economics Mr. Bernstein
Long-Term Economic Growth and AD/AS model
LRAS is vertical, at point of potential output
Long-Term Growth
is represented by
a rightward shift in
the LRAS

5. AP Economics Mr. Bernstein
Long-Term Econ Growth vs. Short-Term Fluctuations
Shift in AD or SRAS is a short-term fluctuation
Recessionary or
Inflationary Gaps,
and the adjustment
process back to LRAS,
are fluctuations in the
business cycle, not
Long-Term Econ Growth