Lecture Economics (19/e) - Chapter 29: Aggregate demand and aggregate supply

After reading this chapter, you should be able to: Define aggregate demand (AD) and explain the factors that cause it to change; define aggregate supply (AS) and explain the factors that cause it to change; discuss how AD and AS determine an economy''s equilibrium price level and level of real GDP; describe how the AD-AS model explains periods of demand-pull inflation, cost-push inflation, and recession; identify how the aggregate demand curve relates to the aggregate expenditures model.

Supply29

long as interest rates and tax rates

do not change)

price level

P 1

0

production costs

costs

costs

Productivity = total outputtotal inputs

output

Price Level (Index Number)

Real Output Supplied (Billions)