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Lecture

Chapter 26 - Aggregate Demand & Supply.docx

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Department
Economics
Course
ECON 1010
Professor
Steven Edwards
Semester
Winter

Description
Chapter 26 – AGG DEMAND AGG SUPPLY Quantity of real GDP supplied is the total quantity of goods and services, valued in constant base year 2002 dollars, that firms plan to produce during a given period. Real Gdp is potential gdp at full employment Aggregate supply is the relationship between the quantity of real GDP supplied and the price level. Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level, when the money wage rate changes in step with the price level to maintain full employment. Short-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level, when the money wage rate, the prices of other resources, and potential GDP remain constant. Potential GDP can increase: increase in full employment quantity of labour, increase in quantity of capital, advance in technology. Real GDP demanded Y=C + I + G + (X-M) Quantity of real GDP demanded is total amount of goods/ser produced in Canada that ppl plan to buy Buying plans depend on: Price level, Expectations, Fisical and Monetary policy, world economy Aggregate demand is the relationship between the quantity of real GDP demanded and the price level. Slopes down for two reasons: wealth effect, substitution effect. Changes in aggregate demand due to: Expectations, fisical policy, world economy Governments influence on economy by setting taxes, payments is fiscal policy. Disposable income is
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