ECO102H1 Lecture Notes - Lecture 5: Aggregate Supply, Aggregate Demand, Economic Equilibrium
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ECO102H1 Full Course Notes
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We always refer to demand and supply in price/quantity space. Price is the price level ( all prices) In micro, we had a demand and supply curve determine equilibrium. In macro, we have an aggregate demand and aggregate supply curve to determine equilibrium. The relationship between the aggregate price level and desired aggregate expenditures. Total desired spending (directly related to ae) If prices rise, will households, investors, the government, and foreign markets spend more or less. The relationship between the aggregate price level and the supply of output (think manufactured. When prices rise, the purchasing power of each dollar decreases. With a fixed income, the amount of consumption that is possible decreases. When prices rise, imports increase, exports decrease. When prices rise, canadian goods are now relatively more expensive compared to. With a fixed exchange rate, consumers increase their consumption of foreign goods foreign goods. Households save today in order to spend tomorrow.
