AD = GDP
AD= GDP = C+I+G+(X-M)
- So what are some examples of demand shocks that would affect AD and which components of GDP would they affect?
- On an AD-AS Diagram, show the change that would happen if the Fed lowered interest rates.
- Which component(s) of GDP is being affected by this?
- Assume the economy is in an inflationary gap. What is one way the government could use fiscal policy to close the inflationary gap?
Work Session:
Get out your article/the summary, etc. regarding your article.
- Draw the corresponding AD-AS graph for the situation described in your article. Example: Inflationary Gap.
- Describe the situation.
- Evaluate and explain a possible fiscal or monetary policy tool that could be used to close the gap.
Homework:
- USATestPrep – Macroeconomics Review