Office Hours: Multiple Shocks with the AD-AS Model

Think you understand the AD-AS model? Put your knowledge to test by exploring how three real-world examples of multiple shocks to an economy might play out.

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[ssandok]

It would be helpful to explain why when you're changing the LRAS it also impacts the SRAS.   Explaining one but moving both isn't clear for students.   Giving that intuition would be really illustrative.

[oyqtmqf]

I highly doubt your practice question #1 is correct. It says "the inflation will increase in the long run", but that's only possible when AD2 would remain. However, your last videos clearly said that the change in V is temporary and the AD curve would go back to where it used to be. OR you should've said like "consumers become more optimistic PERMANENTLY", which is unrealistic IMO.

[perseustitanslayer]

Why does a new invention reduce the inflation rate

[Xamarin]

This is not a very good video. The examples of AD-AS shocks provided in this video are unrealistic and unintuitive. The second example is the worst offender because the only AS curve that should have moved in the second example was the SRAS curve going down. The good weather affects the fundamental factors of production for only one season (that is, the season that had good weather). Weather is random and reliably predictable only in the short-term, even with our best technology. This means that for the second example, the LRAS curve should have stayed the same, and the SRAS curve was the only AS curve that should've positively changed (shifted down). The SRAS does shift down in the video for the explanation, but it happens between talking blocks with no given reason.


EDIT: If the *annual climate* of the region changes in net-production-positive way, THEN the long-term aggregate supply would increase.