Aggregate Demand And Aggregate Supply Analysis
Economics notes
Aggregate Demand And Aggregate Supply Analysis
➡️ Equilibrium occurs when the quantity of goods and services supplied is equal to the quantity of goods and services demanded. This is the point at which the market is in balance and prices are stable.
➡️ Disequilibrium occurs when the quantity of goods and services supplied is not equal to the quantity of goods and services demanded. This can lead to price changes as the market attempts to reach equilibrium.
➡️ Disequilibrium can be caused by a variety of factors, such as changes in consumer preferences, changes in the cost of production, or changes in government policies.
How does an increase in aggregate demand affect the economy?
An increase in aggregate demand will lead to an increase in economic output, as businesses will produce more goods and services to meet the increased demand. This will lead to an increase in employment, wages, and prices.
What is the difference between short-run and long-run aggregate supply?
Short-run aggregate supply is the total amount of goods and services that firms are willing to produce at a given price level in the short-run. Long-run aggregate supply is the total amount of goods and services that firms are willing to produce at a given price level in the long-run. The long-run aggregate supply is determined by the economy's productive capacity, while the short-run aggregate supply is determined by the current level of production.
How does a change in aggregate supply affect the economy?
A change in aggregate supply will affect the economy in two ways. First, it will affect the price level, as a decrease in aggregate supply will lead to an increase in prices, while an increase in aggregate supply will lead to a decrease in prices. Second, it will affect the level of economic output, as a decrease in aggregate supply will lead to a decrease in output, while an increase in aggregate supply will lead to an increase in output.