11 explain why the following statements are false a the aggregate demand curve slopes downward b

11 explain why the following statements are false a the...

A.) "The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods." B.) "The long-run aggregate-supply curve is vertical because economic forces do not affect long-run aggregate supply." C.) "If firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal." D.) "Whenever the economy enters a recession, its long-run aggregate-supply curve shifts to the left.

Transcript

00:01 So here we have some statements about aggregate demand, aggregate supply, that we need to refute, right? so a, a, d is some of individual demands.

00:17 This is wrong on a couple of levels, right? you can't add individual demands, please, right? two oranges plus three apples does not compute right right this this just doesn't work right there's no way to add these things meaningfully right the other problem is that the we have the variable is p right not individual prices so each individual good has its own price.

00:58 So each of these goods is being measured in terms of a different price.

01:01 You can't add those together in any way, right? if you say that the price of oranges is $3 and the price of apples is $2, right, they're being measured in different prices.

01:11 So you can only add demand curves when they're being measured in the same quantity and at using the same price.

01:18 And neither of those two things apply here, right? b, long run aggregates apply vertical.

01:29 As unaffected by economic forces.

01:36 Well, you can sort of tell this is wrong because it's such a broad statement.

01:40 Economic forces could mean anything, right? but remember what the aggregate demand variables are, p, l -a -s.

01:49 This is only vertical, it's vertical because unaffected by p, not by economic forces in general, but only by p.

01:59 Right? that's the only thing that matters.

02:01 Obviously lots of economic forces can affect las, but since its price on the vertical axis, what the vertical curve is telling you is that it doesn't, the price level does not matter...

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