aggregate-supply

Aggregate-supply - Aggregate Demand Aggregate Supply and Inflation The Aggregate Demand Curve Aggregatedemandis thetotaldemandfor

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    Aggregate Demand, Aggregate Supply, and Inflation
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The Aggregate Demand Curve Aggregate demand  is  the total demand for  goods and services in  the economy.
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Deriving the Aggregate Demand Curve To derive the aggregate demand  curve, we examine what happens  to aggregate output (income) ( Y when the price level ( P ) changes,  assuming no changes in  government spending ( G ), net  taxes ( T ), or the monetary policy  variable ( M s ).
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Deriving the Aggregate Demand Curve ↑ → ↑ → ↑ → ↓ → ↓ → ↓ P M r I A E d Y The Impact of an Increase in the Price Level on the Economy – Assuming No Changes in G , T , and M s
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Deriving the Aggregate Demand Curve The aggregate demand (AD) curve is a curve that shows the negative relationship between aggregate output (income) and the price level.
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The Aggregate Demand Curve: A Warning The  AD  curve is not a market demand  curve.  It is a more complex concept. We cannot use the ceteris paribus  assumption to draw an  AD  curve. In  reality, many prices (including input  prices) rise together.
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The Aggregate Demand Curve: A Warning A higher price level causes the  demand for money to rise, which  causes the interest rate to rise. Then, the higher interest rate  causes aggregate output to fall.
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The Aggregate Demand Curve: A Warning At all points along the  AD  curve, both the  goods market and the  money market are in  equilibrium.
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Other Reasons for a Downward- Sloping Aggregate Demand Curve The consumption link:   The  decrease in consumption brought  about by an increase in the  interest rate contributes to the  overall decrease in output.
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Other Reasons for a Downward- Sloping Aggregate Demand Curve The real wealth effect , or  real  balance effect  is the change in  consumption brought about by a  change in real wealth that results  from a change in the price level.
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Aggregate Expenditure and Aggregate Demand At every point along the aggregate  demand curve, the aggregate  quantity of output demanded is  exactly equal to planned  aggregate expenditure. Y = C + I + G equilibrium condition
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Shifts of the Aggregate Demand Curve An increase in the  quantity of money  supplied at a given  price level shifts the  aggregate demand  curve to the right.
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Shifts of the Aggregate Demand Curve An increase in  government  purchases or a  decrease in net taxes  shifts the aggregate  demand curve to the  right.
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Curve Factors That Shift the Aggregate Demand Curve Expansionary monetary policy M s AD curve shifts to the right Contractionary monetary policy M s AD curve shifts to the left Expansionary fiscal policy G AD curve shifts to the right Contractionary fiscal policy
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This note was uploaded on 12/01/2010 for the course BUSINESS 2251 taught by Professor Mixon during the Spring '02 term at CLL.

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Aggregate-supply - Aggregate Demand Aggregate Supply and Inflation The Aggregate Demand Curve Aggregatedemandis thetotaldemandfor

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