Professional Documents
Culture Documents
Aggregate demand is the total demand for goods and services in the economy.
2 of 47
P M d r I AE Y
3 of 47 4 of 47
5 of 47
6 of 47
3/29/2011
7 of 47
8 of 47
9 of 47
10 of 47
11 of 47
12 of 47
3/29/2011
Expansionary fiscal policy G T AD curve shifts to the right AD curve shifts to the right
Contractionary fiscal policy G T AD curve shifts to the left AD curve shifts to the left
13 of 47
14 of 47
Aggregate supply is the total supply of all goods and services in the economy.
The aggregate supply (AS) curve is a graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level.
15 of 47
16 of 47
17 of 47
18 of 47
3/29/2011
19 of 47
20 of 47
21 of 47
22 of 47
23 of 47
24 of 47
3/29/2011
25 of 47
26 of 47
Decreases in Aggregate Supply Higher costs higher input prices higher wage rates Stagnation capital deterioration
Public policy waste and inefficiency over-regulation Bad weather, natural disasters, destruction from wars
28 of 47
27 of 47
29 of 47
30 of 47
3/29/2011
32 of 47
33 of 47
34 of 47
3/29/2011
37 of 47
38 of 47
Causes of Inflation
Causes of Inflation
Demand-pull inflation is inflation initiated by an increase in aggregate demand. Cost-push, or supplyside, inflation is inflation caused by an increase in costs.
Inflation is an increase in the overall price level. Sustained inflation occurs when the overall price level continues to rise over some fairly long period of time.
39 of 47
40 of 47
41 of 47
42 of 47
3/29/2011
43 of 47
44 of 47
45 of 47
46 of 47
47 of 47