Brief Outline of Topics Covered in Lecture 17
Chapter 22 Aggregate Demand and Supply Analysis
The Aggregate Supply Curve
- LRAS curve
- SRAS curve
- Shifts in the LRAS curve
- Shifts in the SRAS curve
- Equilibrium of AS and AD
- SR and LR response to AD shocks
- SR and LR response to AS shocks
Chapter 22 - Appendix - The Phillips Curve and the SRAS Curve (We probably won't get this far)
The Phillips curve
- The PC in the 1960's: A permanent tradeoff
- The Friedman-Phelps augmented PC
- The modern PC (adds supply shocks)
- The modern PC with Adaptive Expectations
- Okun's law and the SRAS
Extra Reading
Cash for Corollas: When Stimulus Reduces Spending, by Mark Hoekstra, Steven L. Puller, Jeremy West, NBER Working Paper No. 20349 Issued in July 2014: Cash for Clunkers was a 2009 economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced households to purchase more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy.
