In the Long Run Population
 Productivity
 Discovery of new resources
 Technology
 Processes improve
May or May not signify improved standards of living
Recession and Downturn- contraction- Negative economic growth rate and lower economic growth
rate—Unemployment- lower output by firms- deflationary pressure-
Lowest point of the downturn in economic growth rate is called TROUGH
Long term trend lineRecovery ---Economic growth
AGGREGATE DEMAND
• The wealth effect- pl
increasing real value of your
assets (wealth decreases) so
you spend less.
• The Trade Effect – When
price levels are high- goods
and services are less
competitive in world markethence x decrease—nx will
decrease hence output
demanded at higher price
level is less
• The Interest Rate effect-when
pl is high Interest rate is high.
Students work
Aggregate Supply- SRAS
Page Number 241
More controversial—I will touch upon the meaning and factors that affect the SR AS
Short run – Fixed Wage period- Where wages rates do not change following changes in price levels
or demand for labour etc.
Why?
Contract- Minimum wages – Labour Union power etc.
Definition of AS