This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ds and services are
determined by the forces of aggregate
demand and aggregate supply.
The forces of aggregate demand and supply determine the equilibrium price level
and equilibrium quantity of goods and services (equilibrium output) in an economy.
The equilibrium price level (PE in Exhibit
11-10) and the equilibrium quantity of
goods and services, or output (QE in Exhibit 11 (286-309) EMC Chap 11 12/5/05 3:22 PM Page 305 Equilibrium in an
about through the
economic forces of
(AD) and aggregate
supply (AS). The
economy is in equilibrium at point A in
the exhibit. 11-10), come to exist over time. For example, at P1 the quantity demanded of goods
and services (Q1) is less than the quantity
supplied of goods and services (Q2), resulting in a surplus of goods and services. As a
result, the price level drops. At a lower price
level, people buy more goods and services,
and producers produce less. The surplus
begins to disappear because of these actions
on the part of buyers and sellers. (Buyers are
helping to eliminate the surplus by...
View Full Document
This document was uploaded on 01/16/2014.
- Winter '14