ECN 204 Chapter Notes - Chapter 12: Aggregate Supply, Aggregate Demand, Monel

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raspberrycrow939

31 Mar 2016

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Chapter 12 aggregate demand and aggregate supply. Aggregate demand-aggregate supply monel the macroeconomic model that uses aggregate demand and aggregate supply to explain price level and real domesic output. Aggregate demand: is a schedule or curve that shows the amounts of real output (real gdp) that buyers collecively desire to purchase at each possible price level. The downsloping aggregate demand curve ad indicates an inverse relaionship between the price level and the amount of real output purchased. It slopes downward because of: (1) the real-balances efect (2) the interest-rate efect (3) the foreign-trade efect. Price level goes up, real gdp goes down. Price level goes down, real gdp goes up. A change in the price level (m/p ) = (m/p) = real gdp . Price -> interest -> investment -> real gdp . A change in the price level causes a change in export. Price -> export -> net export -> real gdp .

Related Questions

What is aggregate demand?

What is Aggregate Demand?

Aggregate Demand refers to the total expenditure on domestic goods and services within an economy. The Aggregate Demand (AD) thus represents the relationship between the total quantity of output demanded in the economy and the overall price level. Like the basic demand curve, the AD curve also slopes downward to reflect the inverse relationship between aggregate price and aggregate quantity demanded.

Which of the following is correct?

a)the intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity of a single good.

b)The aggregate demand curve indicates a positive relationship between the price level and GDP.

c)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity.

d)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price level and the equilibrium level of real GDP.

e)Other things equal, a downward shift of the aggregate demand curve implies that the economy enters an expansionary phase.

erinhyena808

1. Discuss the difference between an increase in the aggregate demand curve and an increase in the quantity of real GDP demanded. Include a discussion of how the price level relates to each event.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. Describe the difference between a microeconomic demand curve and an aggregate demand curve.

4. The aggregate demand curve portrays the relationship between the price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

5. What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?

6. Shifts in the Aggregate Supply Curves

List and discuss the things that will make the Short Run Aggregate Supply curve shift to the left or to the right. Illustrate.

List and discuss the things that will make the Long Run Aggregate Supply curve shift to the left or to the right. Illustrate.

7. What is the natural level of output?

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ECN 204 Chapter Notes - Chapter 12: Aggregate Supply, Aggregate Demand, Monel

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What is Aggregate Demand?