AGGREGATE DEMAND & AGGREGATE SUPPLY

AGGREGATE DEMAND & AGGREGATE SUPPLY - AGGREGATE DEMAND...

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(1) AGGREGATE DEMAND 1) DEFINITION: IT IS ACHEDULE OR CURVE THAT SHOWS THE AMOUNTS OF REAL OUTPUT (REAL GDP) THAT BUYERS COLLECTIVELY DESIRE TO PURCHASE AT EACH POSSIBLE PRICE LEVEL. 2) AGGREGATE DEMAND CURVE: SLOPES DOWNWARD BECAUSE OF: 1. REAL-BALANCES EFFECT (RELATED T CONSUMPTION) 2. INTEREST-RATE EFFECT (RELATED TO INVESTMENT) 3. FOREIGN TRADE EFFECT (RELATED TO NET EXPORTS) 3) CHANGES IN AGGREGATE DEMAND (DETERMINANTS): (Fig. 10.2) 1. CONSUMER SPENDING: (C) (1) CONSUMER WEALTH (2) CONSUMER EXPECTATIONS (3) HOUSEHOLD DEBT (4) PERSONAL TAXES (5) REAL INTEREST RATES) 2. INVESTMENT SPENDING: (I) (1) REAL INTEREST RATES (2) EXPECTED RETURNS): (FOUR FACTORS) 1) EXPECTATIONS ABOUT FUTURE 2) TECHNOLOGY 3) DEGREE OF EXCESS CAPACITY 4) BUSINESS TAXES 3. NET EXPORT SPENDING (Xn) (1) NATIONAL INCOME ABROAD (2) EXCHANGE RATES
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(2) AGGREGATE SUPPLY 1) DEFINITION: IS A SCHEDULE OR A CURVE SHOWING THE LEVEL OF REAL DOMESTIC OUTPUT THAT FIRMS WILL PRODUCE AT EACH PRICE LEVEL.
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AGGREGATE DEMAND & AGGREGATE SUPPLY - AGGREGATE DEMAND...

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