ECON 1BB3 : Macro notes.docx
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ECON 1BB3 Full Course Notes
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Absolute advantage occurs when a country or region can create more of a product with the same factor inputs. Planned capital investment by private sector businesses is linked to the growth of demand for goods and services. When consumer or export demand is rising strongly, businesses may increase investment to expand their production capacity and meet the extra demand. This process is known as the accelerator effect. But the accelerator effect can work in the other direction! A slowdown in consumer demand can create excess capacity and may lead to a fall in planned investment demand. Aggregate demand curve the aggregate-demand curve shows the quantity of goods and services that households, firms, and the government want to buy at each price level. Aggregate supply (as) measures the volume of goods and services produced within the economy at a given price level.