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Running head: SUPPLY AND DEMAND CURVESupply and Demand CurveQuinnie NguyenRasmussen CollegeAuthor NoteThis written assignment is being submitted on August 5, 2018, for Professor GeoffreyVanderpal’s Money and Banking course.
SUPPLY AND DEMAND CURVESupply and Demand CurveSupply and demand are the two fundamental concepts of economics. The demand indicates to how much a product or service wanted by buyers while supply expresses how much the market is willing to offer. The price can reflect supply and demand. This essay will talk abouthow the aggregate demand and supply curve works and explain how those curves, shifts under Investment–Savings / Monetary–Policy may forecast the economy.The Aggregate Supply Curve Aggregate supply (AS) relates to the total quantity of output that the companies will produce and sell (Khanacademy, n.d.). Thus, the aggregate supply curvedisplays the total quantity of output that the companies will produce and sell at each price level (Khanacademy, n.d.). The aggregate supply shiftsand shows how much output is supplied by companies at various price levels (Khanacademy, n.d.). The short run is a time during which wages and some other prices are sticky (Khanacademy, n.d.). The long run is a time in which full wage, price flexibility, and market adjustment have been obtained so that the economy is at the natural level of employment and potential output (Khanacademy, n.d.). Specifically, the short-run aggregate supply (SRAS) curveis an upward-sloping curve that represents the quantity of total output that will be generated at each price level in the short run (Khanacademy, n.d.). Wage and price stickiness account for the short-run aggregate supply 2
SUPPLY AND DEMAND CURVEcurve’s upward slope (Khanacademy, n.d.).A shift in SRAS due to higher oil prices (left graph)A movement along SRAS due to higher AD (increase real GDP and PL) (right graph) (Pettinger, n.d.).3
SUPPLY AND DEMAND CURVEMeanwhile, the long-run aggregate supply (LRAS) curveis a vertical line at the potential levelof output and often seen as static because it shifts the slowest (Pettinger, n.d.). The long-run aggregate supply curve shows an economist’s belief that changes in aggregate demand only have