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AP Macroeconomics – Short-Run Equilibrium and Changes in AS/AD

This lesson supports the National Income and Price Determination section of the Advanced Placement Macroeconomics course. The focus of this lesson is on short-run equilibrium in the AS/AD model and the changes in real GDP and the price level if AS or AD changes. Students need to learn how to graph and explain changes in AS and AD and the resulting effects on equilibrium price level and real GDP.

This lesson appears as Lesson 4, Unit 3: National Income and Price Determination in CEE's Advanced Placement Macroeconomics (4th Edition)

Time Required

In this lesson from Advanced Placement Macroeconomics (4th Edition),  students learn that the AS and AD model uses AS and and AD to determine the equilibrium price level and aggregate quantity of output (real GDP) in the economy. They practice how to correctly label graphs illustrating these concepts.

Students extend their graphing skills and explain how the equilibrium price and quantity in the economy will change when either the short-run aggregate supply (SRAS) or the AD curve shifts. They create AS/AD graphs based on real-life scenarios such as “Fine weather results in the highest corn and wheat yields in 40 years” and “To balance the budget, the federal government cuts Social Security payments by 10 percent and federal aid to education by 20 percent.”

Bell Ringer: Have students draw a correctly labeled graph illustrating AD and SRAS, and ask students to indicate where they think equilibrium will be on their graph.

Will Be Able To

  • Identify and explain equilibrium in the AS/AD model.
  • Graph and explain what happens to the equilibrium price level and real GDP when there is a change in AD or AS.

Materials

Process

Please refer to the Teacher Lesson for Short-Run Equilibrium and Changes in AS/AD.

Conclusion

Not available for this lesson.

Extension Activity

Not available for this lesson.

Assessment

Please refer to the Student Resource Manual for Short-Run Equilibrium and Changes in AS/AD.