Directions:

Now that you've studied the AD / AS model, you understand the "shifters" (determinants) of each. Here's an example of one:

I read an article that stated: Economist almost unanimously expect the Federal Reserve to raise short-term interest rates next week, but are split over when the central bank will raise rates after that. Thinking of the AD/AS determinants, we know that "interest rates" (as set by the Fed) will affect both the C and the Ig variables of our AD line. If interest rates go up, C and Ig will go down. When C and Ig go down, our AD shifts left (less spending). When AD decreases, our new price level will be lower and our new output (GDP) will be lower. (You can see a graph of this on page 254, Figure 12.9 in your text.)

Now, it's your turn. Find a RECENT article whose "event" or "incident" would effect the AD or AS line. Go back and study the determinants (shifters) of both AD and AS (from my lecture notes) before you start scouring news media.

NOTE: The shifters of the AD and AS are not the same as our single market demand and supplyshifters. A single market, like the airline industry, or retail industry won't shift AD or AS ...they will shift D or S for that single industry or market. So, again, please refer to your lecture notes and find those AD and AS shifters so you can look for news that fits this assignment.

DIRECTIONS for posting:

1. Post your article's headline and a few sentences describing what your article is about. (Please do not use web sources where we have to subscribe. Use only sources that are open for viewing (msn, yahoo, reuters, etc.). You must cite your source by including the link.
2. Which curve is being affected, AD or AS?
3. What's causing the shift (determinant)?
4. Which direction is it shifting (increase-right or decrease-left)?
5. After the shift occurs, refer to the vertical axis of an AD/AS graph, will the new equilibrium price level (Pe) be higher or lower?
6. After the shift occurs, refer to the horizontal axis of an AD/AS graph, will the new equilibrium level of output, GDP (Ye) be higher or lower?