The Aggregate Demand Curve
Вставка
- Опубліковано 26 вер 2024
- This wk: Put your quantity theory of money knowledge to use in understanding the aggregate demand curve.
Next wk: Use your knowledge of the AD curve to dig into the long-run aggregate supply curve.
The aggregate demand-aggregate supply model, or AD-AS model, can help us understand business fluctuations. In this video, we’ll focus on the aggregate demand curve.
The aggregate demand curve shows us all of the possible combinations of inflation and real growth that are consistent with a specified rate of spending growth. The dynamic quantity theory of money (M + v = P + Y), which we covered in a previous video, can help us understand this concept.
We’ll walk you through an example by plotting inflation on the y-axis and real growth on the x-axis -- helping us draw an aggregate demand curve!
Next week, we’ll combine our new knowledge on the AD curve with the long-run aggregate supply curve. Stay tuned!
Subscribe for new videos: bit.ly/1Rib5V8
Macroeconomics Course: bit.ly/1R1PL5x
Next video: bit.ly/2oiuIFy
My mind is blown!! You explained an easier way to derive the Aggregate AD curve in 35 seconds than all of the CFA studied guides I’ve read. Jesus H Christ man. Thank you!
Thank you sir for contributing free education.I love all the videos
Aggregate Demand
== Norminal GDP Growth
= Price Growth + GDP Growth
= Inflation + Real Growth
== Spending Growth in the Economy
= Money Supply Growth + Velocity Growth
i like before watching. the best teacher of economics
i love this channel like, DAMNN!!!, you explain it very well, thankyou!! if you were my lecturer i would have gone to college everyday ....
Thanks for the compliment!
-Roman
This channel is beyond NICE!
Thank you soooooo much this is the best website about macroeconomy I have found. ^0^ I really love it THIS IS VERY USEFULL! not just only the video but they also provide us a quiz to check our understanding.
I am somewhat perplexed by the AD graph, as zero growth does not start at the origin for the Y axis. Why is that? I can only think it is to allow for the possibility of a recession and negative growth and a shrinking economy
hello mr tabernacle, u help me so much sir. i got a great note on my last examination sir. cheers from new delhi!
So the shifters of AD is basically Y=C+I+G+NX ?
Simran Sinha yes
Thank you Sir! Practice questions really helps
Thanks for share your acknowledgment
This whole section on the AD-AS model has been really insightful!
But I can't connect it with the rest of the internet, which seems to be defining the curves on the actual GDP and price-level variables, not their derivatives (gdp growth rate and inflation). For eg., see en.wikipedia.org/wiki/Aggregate_demand. Nonetheless, the graphs look exactly the same... which is incredibly confusing to me. Can someone help me clear out the confusion?
Does someone know the music from the background?
daruda sandstorm
thank you
About how you arrive at the AD curve, when studying the AD curve in class, we firstly plotted price level against real output, and we discussed how the downwards-sloping shape of the AD curve was caused by the Pigou wealth effect, Keynes' interest rate effect and the effect of changes of prices on imports and exports. My teacher also suggested that the shape of the AD curve was not known and that it is an empirical issue. This seems to be in contradiction to the model used here, which apart from plotting inflation against change in output, assumes that nominal spending growth remains constant for the entirety of the curve. This assumption would also suggest that the shape of the curve is already known; according to the dynamic form of the quantity theory of money, it is just a straight line with a negative gradient when inflation is plotted against change in real output, as shown in the video. I imagine that when price level is plotted against real output, the AD curve would have a reciprocal shape when derived from the quantity theory of money if nominal spending is assumed to be constant. In this way, deriving the AD curve using the quantity theory of money suggests it is not an empirical issue and that the shape of the curve is known. If anyone could explain the differences in arriving at the curve and clear up whether or not its shape is an empirical issue, that's be brilliant!
Thanks in advance!
The Keynesians love this concept.
was it not m*v = p*y not +?
Hi! I found most diagrams plotting Price Levels against GDP. How does that differ from this?
Its exactly the same thing. Price level is simply the rate of inflation. GDP is the output and/or real income (they are equivalent, it's essentially the real growth rate of output). Hope this helps.
Hi, Priyankar. Jen Campbell is incorrect - they are not the same thing. The price level is an average aggregated nominal level of prices in the economy. Inflation is the *rate of change* of the price level. Think of a car: you have a car's speed, but you also have a car's acceleration - which is the rate of change of the car's speed. If you know any differential calculus, inflation is the first order differential of the price level with respect to time.
If inflation is zero, then the price level remains unchanged. If inflation is positive, the price level is increasing (and the higher the rate of inflation, the faster the change in the price level). If inflation is negative, the price level is decreasing (often referred to as deflation).
Sadly, the confusion between price level and inflation is not as limited as one would hope. I once had an economics teacher who incorrectly labelled the vertical axis as inflation / price level and referred to them as the same. I found this confusing as I was also doing mathematics at the time and it didn't seem to make any sense (inflation being defined as the *rate of change* of the price level). It wasn't until I consulted a serious economics textbook that it was explicitly cleared up.
Why the eminent economists behind this video are perpetuating the misunderstanding is more worrying. I can only assume that they wish to simplify the topic as much as possible. This, to me, is plainly oversimplification.
According to your answer, what's the correct form? Putting inflation rate or price level? Thanks
AD-AS models show the relationship between real output and the price level, so you should label it as the price level.
Sir, the graph here looks to be flawed. Should 0 be at the origin, we can adjust the other two values much better.
uh, prof, why 0% is not in point O?
if M=8%, V=0%, Y=2% then what is inflation(π)?
6% or 8%
6%. The identity equation for the quantity theory of money is M + V = P + Y, so you always want the two sides to be equal. In your example, the equation would be 8% + 0% = P + 2%, so simplify to 8% = P + 2% and solve for P.
-Meg
hi, your practice questions have the wrong answer. it is showing correct answer in practice question as 8%.
Vaibhav Gupta hi. what's the practice questions??
they offer a link to them at the end of the video
Ok thanks a lot!!
you're using a plus sign in the quantity theory of money when this theory clearly states that it's not a sum, but a multiplication. Why?
Max Teitelbaum Because it shows the growth rates version(the dynamic form).
that m is the % of growth in the money supply, not the money supply itself
Yeah my book says it's a sum not addition... confuseddddd
Why is it called "aggregate demand"?
still makes no fucking sense to me
WHY YOUR NO VIDEO ON THE RUSSIAN LANGUGAGE? WHY?
next video : what causes poverty ?
People are poor because either:
- They don't have a job.
- They have a job, but their effort isn't productive.
- They have a job, produce, but what they produce is worthless.
The solution for the first is increasing the demand for jobs by labour market deregulation.
For the second one, it's investment in capital goods.
For the third one, move the activity to more productive industries by freeing up the trade.
People are born poor. I haven't seen anyone born with a diamond, gold platted teeth. I do see trust fund baby who never work a day in her life.
The causes of poverty are attributed to a few factors:
1. Cast and feudal system like India. If your parents are slave, you will be born as slave. Things have changed but not drastic enough to move the needle faster.
2. Barbaric government. A government looking to kill her citizens because of political or economic envy. Governments like Sudan and Russia.
3. Tax. Using the threat of force to take someone's money. Bond is better than tax to finance and maintain infrastructure.
4. Laws protecting the privileged and wealthy. Bank laws, copyright laws, etc. protect incumbents through judicial enforcement. Microsoft putting people in prison for pirating their software.
5. Federal Reserve Act of 1913 giving control of the monetary system to an elite group of banks that CANNOT die regardless how bad they run banking business. Bank of America, Chase, Wells Fargo, Bank of New York ... these are member banks of the Federal Reserve. Until they are structure to die, the economy continues to be manipulated and unfair.