ECN 204 Lecture : macro part 2.docx

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Aggregate demand is the overall demand in an economy at different price levels. Four types of demand: household demand, business demand, foreign demand, government demand. The higher the prices, real income decreases and people feel poorer so ad goes down. The higher the prices the lower the exports and therefore lower. Roi effect, the higher the prices the higher the roi which means lower ad. For any increase in ad, the smaller the increase in real output the greater is the increase in price level. As is the overall ability of products in an economy at different price levels. As is upward slopping and becomes steeper and steeper as the economy grows. When as becomes vertical that means we are all out of resources so we cannot produce more. Other factors effecting as: cost of resources (-, availability of resources (+, better technology (+, weather (+, taxes and government regulations (-, future expectations (+)

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