Economics > LECTURE SLIDES/NOTES > Aggregate demand/Aggregate supply (All)
Aggregate demand/Aggregate supply
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The AS/AD model of macroeconomic equilibrium beyond the short-run From PAE line to AD curve The factors driving changes in inflation Macroeconomic self-adjustment in the long run Role, tools and e... ffectiveness of macroeconomic stabilization policies The aggregate demand curve: relationship between inflation (the rate of change in the price level) and short-run equilibrium output Equilibrium output = planned expenditure => the AD curve shows the relationship between inflation and expenditureding/output in the short run The AD curve is downward sloping=higher inflation lowers planned expenditure and short-run equilibrium output The AD curve and the PAE line We can derive the aggregate demand curve from the planned aggregate expenditure line by: Altering the price level in the aggregate expenditure model Linking together the equilibrium levels of GDP that can be derived from each aggregate expenditure line. As a result, the aggregate demand curve (AD) shows for each price level an equilibrium level of GDP where demand equals output (or where PAE = Y) [Show More]
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