00:01
So here we're talking about aggregate demand, aggregate supply, right? we have a market for all goods, which is indexed by the price level and quantity of output.
00:10
We have an aggregate demand curve, and we are moving from short run aggregate supply two to short run aggregate supply one.
00:18
So we are going from short run aggregate supply two over and down to short run aggregate supply one.
00:26
So what is going on here, right? this is my initial point, and this is my new point.
00:32
So the first thing is that this is associated with the price level going down and with output going up.
00:41
So if we look at b, price level goes down, b looks like a good response, right? that's absolutely true.
00:49
But c is also a good response, right? and unemployment down, this also happens because output is going up, right? if output is going up, you must be hiring more people to produce more output, right? so both c and d are absolutely correct.
01:12
And d is also correct, right? caused by expected price level down.
01:20
This is also correct, right? and the reason here is a little bit more complicated, but since firms want to price competitively, they will want to lower their own prices...