we learned that aggregate demand is the total demand for goods and services in an economy

We learned that aggregate demand is the total demand for goods and services in an economy

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we learned that aggregate demand is the total demand for goods and services in an  economy. But the aggregate demand curve alone does not tell us the equilibrium price  level or the equilibrium level of output. In order to obtain this information, we need to add  the aggregate supply curve to the diagram containing the aggregate demand curve.  Then, and only then, do the equilibrium values of the economy in the AS-AD model  appear.  The aggregate supply curve shows the relationship between the price level and the  quantity of goods and services supplied in an economy. The equation for the upward  sloping aggregate supply curve, in the short run, is Y = Ynatural + a(P - Pexpected). In  this equation,  Y  is output,  Ynatural  is the natural rate of output that exists when all  productive factors are used at their normal rates,  a  is a constant greater than zero, 
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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