Transcript aggregate-supply curve

12
SHORT-RUN ECONOMIC
FLUCTUATIONS
Chapter 33
Aggregate Demand
and Aggregate Supply
Short-Run Economic
Fluctuations
• Economic activity fluctuates from year to year.
– In most years production of goods and services
rises.
– On average over the past 50 years, production
in the U.S. economy has grown by about 3
percent per year.
– In some years normal growth does not occur,
causing a recession.
Short-Run Economic
Fluctuations
• A recession衰退 is a period of declining real
incomes, and rising unemployment.
• A depression 萧条 is a severe recession.
33.1
THREE KEY FACTS ABOUT
ECONOMIC
FLUCTUATIONS
33.1.1. Fact 1: Economic fluctuations are
irregular and unpredictable
• Fluctuations in the economy are often called the
business cycle. Economic fluctuations correspond
to changes in business conditions.
• When real GDP grow rapidly, business is good.
During such periods of economic expansion, firms
find that customers are plentiful and that profits
are growing.
• On the other hand, when real GDP falls during
recessions, businesses have trouble. During such
periods of economic contraction, most firms
experience declining sales and dwindling profits.
Figure 1 A Look At Short-Run Economic
Fluctuations
(a) Real GDP
Billions of
1996 Dollars
$10,000
9,000
Real GDP
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1965
1970
1975
1980
1985
1990
1995
2000
Figure 1a. A Look At Short-Run Economic
Fluctuations of China
Figure.1952-2005 real GDP in China
3E+12
3E+12
2E+12
2E+12
1E+12
5E+11
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
1958
1955
1952
0
33.1.2 Fact 2: Most macroeconomic variables
fluctuate together
• Most macroeconomic variables that measure some
type of income, spending, or production fluctuate
closely together. When real GDP falls in a recession,
so do personal income, corporate profits, consumer
spending, investment spending, industrial
production, retail sales, home sales, auto sales, and
so on. Because recessions are economy-wide
phenomena, they show up in many sources of
macroeconomic data.
• Although many macroeconomic variables fluctuate
together, they fluctuate by different amounts.
Figure 1 A Look At Short-Run Economic
Fluctuations
(b) Investment Spending
Billions of
1996 Dollars
$1,800
1,600
1,400
Investment spending
1,200
1,000
800
600
400
200
1965
1970
1975
1980
1985
1990
1995
2000
33.1.3 Fact 3: As output falls,
unemployment rises
• Change in the economy’s output of goods and
services are strongly correlated with changes in the
economy’s utilization of its labor force. In other
words, when real GDP declines, the rate of
unemployment rises.
• Changes in real GDP are inversely related to
changes in the unemployment rate.
• During times of recession, unemployment rises
substantially.
Figure 1 A Look At Short-Run Economic
Fluctuations
(c) Unemployment Rate
Percent of
Labor Force
12
10
Unemployment rate
8
6
4
2
0
1965
1970
1975
1980
1985
1990
1995
2000
33.2
EXPLAINING SHORT-RUN
ECONOMIC
FLUCTUATIONS
33.2.1 How the Short Run Differs from
the Long Run
• All of this previous analysis was based on two
related ideas—the classical dichotomy and
monetary neutrality.
• Most economists believe that classical theory
describes the world in the long run but not in the
short run.
• According to classical macroeconomic theory,
Changes in the money supply affect nominal
variables but not real variables in the long run.
• The assumption of monetary neutrality is not
appropriate when studying year-to-year changes in
the economy.
33.2.2 The Basic Model of Economic
Fluctuations
• Two variables are used to develop a model to
analyze the short-run fluctuations.
– The first variable is the economy’s output of
goods and services measured by real GDP.
– The second variable is the overall price level
measured by the CPI or the GDP deflator.
33.2.2 The Basic Model of
Economic Fluctuations
• The Basic Model of Aggregate Demand and
Aggregate Supply
– Economist use the model of aggregate
demand and aggregate supply to explain
short-run fluctuations in economic activity
around its long-run trend.
33.2.2 The Basic Model of
Economic Fluctuations
• The Basic Model of Aggregate Demand and
Aggregate Supply
– The aggregate-demand curve shows the
quantity of goods and services that households,
firms, and the government want to buy at each
price level.
– The aggregate-supply curve shows the quantity
of goods and services that firms choose to
produce and sell at each price level.
Figure 2 Aggregate Demand and Aggregate
Supply...
Price
Level
Aggregate
supply
Equilibrium
price level
Aggregate
demand
0
Equilibrium
output
Quantity of
Output
33.3
THE AGGREGATEDEMAND CURVE
33.3 THE AGGREGATE-DEMAND
CURVE
• The four components of GDP (Y) contribute to
the aggregate demand for goods and services.
Y = C + I + G + NX
Figure 3 The Aggregate-Demand Curve...
Price
Level
P
P2
1. A decrease
in the price
level . . .
0
Aggregate
demand
Y
Y2
2. . . . increases the quantity of
goods and services demanded.
Quantity of
Output
33.3.1 Why the Aggregate-Demand
Curve Is Downward Sloping
1. The Price Level and Consumption: The
Wealth Effect
2. The Price Level and Investment: The
Interest Rate Effect
3. The Price Level and Net Exports: The
Exchange-Rate Effect
33.3.1 Why the Aggregate-Demand
Curve Is Downward Sloping
1. The Price Level and Consumption: The Wealth
Effect 财富效应 (Arthur Pigou, 1877-1959)
– A decrease in the price level makes consumers
feel more wealthy, which in turn encourages
them to spend more.
– This increase in consumer spending means
larger quantities of goods and services
demanded.
33.3.1 Why the Aggregate-Demand
Curve Is Downward Sloping
2. The Price Level and Investment: The Interest
Rate Effect (John Maynard Keynes, 1883-1946)
– A lower price level reduces the interest rate,
which encourages greater spending on
investment goods.
– This increase in investment spending means a
larger quantity of goods and services
demanded.
33.3.1 Why the Aggregate-Demand
Curve Is Downward Sloping
3. The Price Level and Net Exports: The
Exchange-Rate Effect 汇率效应 (Robert Mundell and
Marcus Fleming)
– When a fall in the U.S. price level causes U.S.
interest rates to fall, the real exchange rate
depreciates, which stimulates U.S. net exports.
– The increase in net export spending means a
larger quantity of goods and services
demanded.
33.3.2 Why the Aggregate-Demand
Curve Might Shift
• The downward slope of the aggregate demand
curve shows that a fall in the price level raises
the overall quantity of goods and services
demanded.
• Many other factors, however, affect the quantity
of goods and services demanded at any given
price level.
• When one of these other factors changes, the
aggregate demand curve shifts.
33.3.2 Why the Aggregate-Demand
Curve Might Shift
1) Shifts arising from Consumption: any event
that changes how much people want to
consume at a given price level shifts the
aggregate-demand curve. (a tax cut,a stock
market boom; a tax hike, a stock market
decline.)
33.3.2 Why the Aggregate-Demand
Curve Might Shift
2) Shifts arising from Investment: any event that
changes how much firms want to invest at a
given price level also shifts the aggregatedemand curve. (optimism about the future; a
fall in interest rates due to an increase in the
money supply; pessimism about the future, a
rise in interest rates due to an decrease in the
money supply.)
33.3.2 Why the Aggregate-Demand
Curve Might Shift
3) Shifts arising from Government Purchases:
The most direct way that policymakers shift the
aggregate-demand curve is through government
purchases. (greater spending on defense or
highway construction; a cutback in defense or
highway spending.)
33.3.2 Why the Aggregate-Demand
Curve Might Shift
4) Shifts arising from Net Exports: any event that
changes net exports for a given price level also
shifts aggregate demand. (a boom overseas, an
exchange-rate depreciation; a recession
overseas, an exchange-rate appreciation)
Shifts in the Aggregate Demand
Curve
Price
Level
P1
D2
Aggregate
demand, D1
0
Y1
Y2
Quantity of
Output
33.4
THE AGGREGATE-SUPPLY
CURVE
33.4 THE AGGREGATE-SUPPLY
CURVE
• In the long run, the aggregate-supply curve
is vertical.
• In the short run, the aggregate-supply curve
is upward sloping.
33.4.1 Why the Aggregate-Supply Curve is
Vertical in the Long-Run
• The Long-Run Aggregate-Supply Curve
– In the long run, an economy’s production of
goods and services depends on its supplies of
labor, capital, and natural resources and on the
available technology used to turn these factors
of production into goods and services.
– Because the price level does not affect these
long-run determinants of real GDP, the long-run
aggregate-supply is vertical.
Figure 4 The Long-Run Aggregate-Supply Curve
Price
Level
Long-run
aggregate
supply
P
P2
2. . . . does not affect
the quantity of goods
and services supplied
in the long run.
1. A change
in the price
level . . .
0
Natural rate
of output
Quantity of
Output
33.4.1 Why the Aggregate-Supply Curve is
Vertical in the Long-Run
• The Long-Run Aggregate-Supply Curve
– The long-run aggregate-supply curve is
vertical at the natural rate of output.
– This level of production is also referred
to as potential output or full-employment
output.
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Any change in the economy that alters the
natural rate of output shifts the long-run
aggregate-supply curve.
• The shifts may be categorized according to
the various factors in the classical model
that affect output.
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Shifts arising
– Labor
– Capital
– Natural Resources
– Technological Knowledge
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Shifts arising from labor: An increase in the
quantity of labor available (perhaps due to a fall in
the natural rate of unemployment, an increase in
immigration from abroad.) shift the aggregatesupply curve to the right.
• A decrease in the quantity of labor available
(perhaps due to a rise in the natural rate of
unemployment, many workers left the economy to
go abroad.) shift the aggregate-supply curve to the
left.
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Shifts arising from capital: An increase in the
economy’s capital stock (physical or human
capital) increases productivity and, thereby, the
quantity of goods and services supplied. As a
result, the aggregate-supply curve shifts to the
right.
• A decrease in the economy’s capital stock
(physical or human capital) decreases productivity
and the quantity of goods and services supplied.
shifting the aggregate-supply curve to the left.
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Shifts arising from Natural Resources: An
increase in the availability of natural resources
(land, minerals, and weather) shifts the aggregatesupply curve to the right.
• A decrease in the availability of natural resources
shifts the aggregate-supply curve to the left.
33.4.2 Why the Long-Run AggregateSupply Curve Might Shift
• Shifts arising from Technology: An advance in
technological knowledge shifts the aggregatesupply curve to the right.
• A decrease in technological knowledge shifts the
aggregate-supply curve to the left.
Figure 5 Long-Run Growth and Inflation
2. . . . and growth in the
money supply shifts
aggregate demand . . .
Long-run
aggregate
supply,
LRAS1980 LRAS1990 LRAS2000
Price
Level
1. In the long run,
technological
progress shifts
long-run aggregate
supply . . .
P2000
4. . . . and
ongoing inflation.
P1990
Aggregate
Demand, AD2000
P1980
AD1990
AD1980
0
Y1980
Y1990
Quantity of
Output
3. . . . leading to growth
in output . . .
Y2000
33.4.3 A New Way to Depict Long-Run
Growth and Inflation
• Although there are many forces that govern the
economy in the long-run and can in principle cause
such shifts, the two most important in practice are
technology and monetary policy.
• Technological progress enhances the economy’s
ability to produce goods and services, and this
continually shifts the long-run aggregate-supply
curve to the right.
• At the same time, because the Fed increases the
money supply over time, the aggregate-demand
curve also shifts to the right. The result is trend
growth in output and continuing inflation.
33.4.3 A New Way to Depict Long-Run
Growth and Inflation
• Short-run fluctuations in output and price
level should be viewed as deviations from
the continuing long-run trends.
33.4.4 Why the Aggregate-Supply
Curve Slopes Upward in the Short Run
• In the short run, an increase in the overall
level of prices in the economy tends to raise
the quantity of goods and services supplied.
• A decrease in the level of prices tends to
reduce the quantity of goods and services
supplied.
Figure 6 The Short-Run Aggregate-Supply Curve
Price
Level
Short-run
aggregate
supply
P
P2
2. . . . reduces the quantity
of goods and services
supplied in the short run.
1. A decrease
in the price
level . . .
0
Y2
Y
Quantity of
Output
33.4.4 Why the Aggregate-Supply
Curve Slopes Upward in the Short Run
• The Sticky-Wage Theory 粘性工资理论
• The Sticky-Price Theory 粘性价格理论
• The Misperceptions Theory 错觉理论
33.4.4 Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
• 33.4.4.1. The Sticky-Wage Theory
• According to the sticky-wage theory, the short-run
aggregate-supply curve slopes upward because
nominal wages are slow to adjust, or are “sticky”
in the short run.
• Because wages do not adjust immediately to a fall
in the price level. A lower price level makes
employment and production less profitable. So
firms reduce the quantity of goods and services
they supply.
33.4.4 Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
• 33.4.4.2. The Sticky-Price Theory
• The sticky-wage theory emphasizes that nominal
wages adjust slowly over time. The sticky-price
theory emphasizes that the prices of some goods and
services adjust sluggishly in response to changing
economic conditions.
• Because not all prices adjust instantly to changing
conditions, an unexpected fall in the price level
leaves some firms with higher-than-desired prices,
and these higher-than-desired prices depresses sales
and induces firms to reduce the quantity of goods
and services they produce.
33.4.4 Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
• 33.4.4.3. The Misperceptions Theory
• Changes in the overall price level temporarily
mislead suppliers about what is happening in the
individual markets in which they sell their output.
As a result of these short-run misperceptions,
suppliers respond to changes in the level of prices,
and this response leads to an upward-sloping
aggregate-supply curve.
• A lower price level causes misperceptions about
relative prices. And these misperceptions induce
suppliers to decrease the quantity of goods and
services supplied.
33.4.4 Why the Aggregate-Supply
Curve Slopes Upward in the Short Run
• All three theories suggest that output deviates from
its natural rate when the price level deviates from
the price level that people expected. We can
express this mathematically as follows:
Quantity
Natural
Actual
Expected
of output = rate of +  Price － price
supplied
output
level
level
Where  is a number that determines how much output
responds to unexpected changes in the price level.
33.4.5 Why the Short-Run AggregateSupply Curve Might Shift
• Shifts arising
– Labor
– Capital
– Natural Resources.
– Technology.
– Expected Price Level.
33.4.5 Why the Short-Run Aggregate-Supply
Curve Might Shift
• When thinking about what shifts the short-run
aggregate-supply curve, we have to consider all
those variables that shift the long-run aggregatesupply curve plus a new variable----the expected
price level—that influences sticky wages, sticky
prices, and misperceptions.
33.4.5 Why the Short-Run Aggregate-Supply
Curve Might Shift
• An increase in the expected price level reduces the
quantity of goods and services supplied and shifts
the short-run aggregate supply curve to the left.
• A decrease in the expected price level raises the
quantity of goods and services supplied and shifts
the short-run aggregate supply curve to the right.
Variable
Potential output
Inputs
Impact on aggregate supply
Supplies of capital, labor, and land are the important inputs. Potential output
comes when unemployment of labor and other resources is at noninflationary levels. Growth of inputs increases potential output and
aggregate supply.
Technologyand Innovation, technological improvement, and increased efficiency increase
efficiency
the level of potential output and rise aggregate supply.
Production costs
Lower wages lead to lower production costs; lower costs mean that quantity
Wages
supplied will be higher at every price level for a given potential output.
A decline in foreign prices or an appreciation in the exchange rate reduces
Imports prices
import prices. This lead to lower production costs and raises aggregate
supply.
Lower oil prices or less burdensome environmental regulation lowers
Other input costs
production costs and thereby raises aggregate supply.
TABLE 31-1 Aggregate Supply Depends upon Potential Output and Production Costs
Aggregate supply relates total outputs supplied to the price level. Behind the AS curve lie
fundamental factors of productivity as represented by potential outpu
Appendix 33. Potential output is not
maximum output
1) We must emphasize a subtle point about potential
output: Potential output is the maximum
sustainable output but not the absolute maximum
output that an economy can produce. The
economy can operate with output levels above
potential output for a short time, and indeed this
was the situation during the long economic
expansion of the late 1990s.
2) A useful analogy is someone running a marathon.
Think of potential output as the maximum speed
that a marathoner can run without becoming
“overheated” and dropping out from exhaustion.
Clearly, the runner can run faster than the
sustainable pace for a while, just as the U.S.
economy grew faster than its potential growth rate
during the 1990s. But over the entire course, the
economy, like the marathoner, can produce only at
a maximum sustainable “speed”, and this
sustainable output speed is what we call potential
output. (Samuelson, Economics, 17 edition, p663.)
th
A.1.2. Input Costs
1) The most important cost is labor earnings, which
constitute about three-quarters of the overall cost
of production for a country like the United States.
2) For the small open economies like the
Netherlands or Hong Kong, import costs play an
even greater role than wages in determining
aggregate supply.
(a) Increase in Potential Output
P
Potential output
AS'
Price level
AS
QP
QP'
Q
Real output
Figure 31-1. How Do Growth in Potential Output
and Cost Increases Affect Aggregate Supply?
(b) Increase in Costs
P
AS"
Price level
Potential output
AS
QP
Q
Real output
Figure 31-1. How Do Growth in Potential Output
and Cost Increases Affect Aggregate Supply?
33.5
TWO CAUSES OF ECONOMIC
FLUCTUATIONS
Figure 7 The Long-Run Equilibrium
Price
Level
Long-run
aggregate
supply
Short-run
aggregate
supply
A
Equilibrium
price
Aggregate
demand
0
Natural rate
of output
Quantity of
Output
Figure 8 A Contraction in Aggregate Demand
2. . . . causes output to fall in the short run . . .
Price
Level
Long-run
aggregate
supply
Short-run aggregate
supply, AS
AS2
3. . . . but over
time, the short-run
aggregate-supply
curve shifts . . .
A
P
B
P2
P3
1. A decrease in
aggregate demand . . .
C
Aggregate
demand, AD
AD2
0
Y2
Y
4. . . . and output returns
to its natural rate.
Quantity of
Output
33.5 TWO CAUSES OF ECONOMIC
FLUCTUATIONS
• Shifts in Aggregate Demand
– In the short run, shifts in aggregate
demand cause fluctuations in the
economy’s output of goods and services.
– In the long run, shifts in aggregate
demand affect the overall price level but
do not affect output.
33.5 TWO CAUSES OF ECONOMIC
FLUCTUATIONS
• An Adverse Shift in Aggregate Supply
– A decrease in one of the determinants of
aggregate supply shifts the curve to the left:
• Output falls below the natural rate of
employment.
• Unemployment rises.
• The price level rises.
33.5.1 The Effects of a Shift in Aggregate
Supply
• Now suppose that suddenly some firms experience
an increase in their costs of production. For
example, bad weather in farm states might destroy
some crops, driving up the cost of producing food
products. Or a war in the Middle East might
interrupt the shipping of crude oil, driving up the
cost of producing oil products.
• What is the macroeconomic impact of such an
increase in production costs? For any given price
level, firms now want to supply a smaller quantity
of goods and services.
Figure 10 An Adverse Shift in Aggregate Supply
1. An adverse shift in the shortrun aggregate-supply curve . . .
Price
Level
Long-run
aggregate
supply
AS2
Short-run
aggregate
supply, AS
B
P2
A
P
3. . . . and
the price
level to rise.
Aggregate demand
0
Y2
2. . . . causes output to fall . . .
Y
Quantity of
Output
33.5.1 The Effects of a Shift in Aggregate
Supply
• Policy Responses to Recession
– Policymakers may respond to a recession in
one of the following ways:
• Do nothing and wait for prices and wages
to adjust.
• Take action to increase aggregate demand
by using monetary and fiscal policy.
Figure 11 Accommodating an Adverse Shift in
Aggregate Supply
1. When short-run aggregate
supply falls . . .
Price
Level
Long-run
aggregate
supply
P3
C
P2
A
3. . . . which P
causes the
price level
to rise
further . . .
0
4. . . . but keeps output
at its natural rate.
Natural rate
of output
Short-run
aggregate
supply, AS
AS2
2. . . . policymakers can
accommodate the shift
by expanding aggregate
demand . . .
AD2
Aggregate demand, AD
Quantity of
Output
33.5.1 The Effects of a Shift in
Aggregate Supply
• Stagflation
– Adverse shifts in aggregate supply cause
stagflation—a period of recession and inflation.
• Output falls and prices rise.
• Policymakers who can influence aggregate
demand cannot offset both of these adverse
effects simultaneously.
Summary
• All societies experience short-run economic
fluctuations around long-run trends.
• These fluctuations are irregular and largely
unpredictable.
• When recessions occur, real GDP and other
measures of income, spending, and
production fall, and unemployment rises.
Summary
• Economists analyze short-run economic
fluctuations using the aggregate demand
and aggregate supply model.
• According to the model of aggregate
demand and aggregate supply, the output of
goods and services and the overall level of
prices adjust to balance aggregate demand
and aggregate supply.
Summary
• The aggregate-demand curve slopes
downward for three reasons: a wealth effect,
an interest rate effect, and an exchange rate
effect.
• Any event or policy that changes
consumption, investment, government
purchases, or net exports at a given price
level will shift the aggregate-demand curve.
Summary
• In the long run, the aggregate supply curve
is vertical.
• The short-run, the aggregate supply curve is
upward sloping.
• The are three theories explaining the
upward slope of short-run aggregate supply:
the misperceptions theory, the sticky-wage
theory, and the sticky-price theory.
Summary
• Events that alter the economy’s ability to
produce output will shift the short-run
aggregate-supply curve.
• Also, the position of the short-run
aggregate-supply curve depends on the
expected price level.
• One possible cause of economic
fluctuations is a shift in aggregate demand.
Summary
• A second possible cause of economic
fluctuations is a shift in aggregate supply.
• Stagflation is a period of falling output and
rising prices.
Mankiw33. Questions for Review
1. List and explain the three reasons why the aggregatedemand curve is downward sloping?(Mankiw,ch33-pp729-731.)
2. Explain why the long-run aggregate-supply curve is
vertical? (Mankiw,ch33-p734.)
3. List and explain the three theories why the short-run
aggregate-supply curve is up sloping?(Mankiw,ch33-p738-740.)
4. What might shift the aggregate-demand to the left? Use
the model of aggregate demand and aggregate supply to
trace through the effects of such a shift.(Mankiw,ch33,p731-733.)
5. What might shift the aggregate-supply to the left? Use
the model of aggregate demand and aggregate supply to
trace through the effects of such a shift. (Mankiw,ch33-pp735736. & p742-table2.)
复习题
1.写出当经济进入衰退时下降的两个宏观经济变量。写出
当经济进入衰退时上升的一个宏观经济变量。
2. 画出一个有总需求、短期总供给和长期总供给的图。
仔细地标出正确的轴。
3. 列出并解释总需求曲线向右下方倾斜的三个原因。
4. 解释为什么长期总供给曲线是垂线。
5. 列出并解释为什么短期总供给曲线向右上方倾斜的三
种理论。
6. 什么因素引起总需求曲线向左移动？ 用总需求和总供
给模型来探讨这种移动的影响。
7. 什么因素引起总供给曲线向左移动？ 用总需求和总供
给模型来探讨这种移动的影响。