LECTURE%20NOTES%2010 - University of Modern Sciences & Arts...

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University of Modern Sciences & Arts (MSA) Aggregate demand and aggregate supply/exercise Dr. Heba Helmy ECO-101 Lecture notes 10 AGGREGATE DEMAND AND AGGREGATE SUPPLY NOWADAYS ECONOMISTS HAVE FOUND OUT THAT AGGREGATE DEMAND AND AGGREGATE SUPPLY ARE BEHIND THE MAJOR CHANGES IN OUTPUT, PRICES AND EMPLOYMENT. BUT WHAT IS AGGREGATE SUPPLY AND AGGREGATE DEMAND? AGGREGATE SUPPLY REFERS TO THE TOTAL QUANTITY OF GOODS AND SERVICES THAT THE NATIONS BUSINESSES ARE WILLING TO PRODUCE AND SELL IN A GIVEN PERIOD. *AGGREGATE SUPPLY (AS) DEPENDS ON THREE FACTORS: A) THE PRICE LEVEL OF THE ECONOMY. B) THE POTENTIAL CAPACITY OF THE ECONOMY OR POTENTIAL OUTPUT WHICH IN TURN DEPENDS ON: C) THE COST OF INPUTS (LAND, LABOR, CAPITAL AND MANAGERIAL OR TECHNICAL EFFICIENCY). AGGREGATE DEMAND REFERS TO THE TOTAL AMOUNT THAT DIFFERENT SECTORS OF THE ECONOMY (C, I, G,X) WILLINGLY SPEND IN A GIVEN PERIOD. *AGGREGATE DEMAND (AD) DEPENDS ON : A) THE PRICE LEVEL OF THE ECONOMY. B) MONETARY POLICY.
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LECTURE%20NOTES%2010 - University of Modern Sciences & Arts...

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