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Chapter 5

ECON 203 Chapter 5: Econ 203 Chapter 5 - AD and AS


Department
Economics
Course Code
ECON 203
Professor
N A
Chapter
5

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ignore
news f-
spemnahaungteaaity
-earnings ,payoff for
employee 's effort
balue of workers '
,
producers
'contributions
to economic activity
(production)
The economic model
of aggregate demand and aggregate
supply
AD is determined by income ,prices
,interest
-hates ,taxes ,availability ,
buyers
'behaviour substitutes
As it
determined by demand (domestic &
producers
'behaviour foreign ),
quality dgeuantity of resources
,
cost of production ,
Access to markets
prices ,value of currency
We describe AD and As in our model
depending on Pf the price level in the economy
CPI ,GDP deflator

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AD =FlPweY
PM
⇒=¥Itet*
inverse demand :
p= feast ⇒↳g
Edythe
demand for
production
When PT
,purchasing power
Quantity )
decreases ,th
will purchase less with
the same amount of money
tonsures (households )
companies
government
foreign buyers.
WEALTH EFFECT
When PT ,
consumers prefer
#
substitutes ,
{
imports
domestic demand for goods &santos
decreases
÷
BSTTTUTTOM EFFECT
When interest hates T,
the overall price
of durable goods 4
TNRR#e=EFFEa.
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