00:01
So here we're going to apply the aggregate demand, aggregate supply model.
00:04
And aggregate demand, aggregate supply is usually written in terms of real output, y, on the horizontal axis, and price, right? aggrit supply slopes up, higher prices induce the production of more output, and conversely, aggregate demand slopes down, right? so this is sort of based on your microeconomic principles, expanded to the economy as a whole.
00:23
Now we've got two situations.
00:26
So in situation a, we have consumers are going to be happy.
00:30
In general, we should think of ad as reflecting consumers and as is reflecting firms, right? firms produce stuff, consumers buy stuff.
00:41
Now, firms buy stuff too and government buy stuff, but consumers are definitely on the demand side.
00:46
So we think this is going to affect aggregate demand.
00:48
Consumers are happy.
00:50
Well, if i was going to try to map this into the model, i would say that consumers being happy, having more confidence about the future, they expect to be richer in the future, they expect that the probability of unemployment in their future is low.
01:02
That allows them to spend more today...