Aggregate Demand (AD)
The total demand for all goods and services in an economy.
Measured in Real GDP
Changes In Aggregate Demand
Expansion Increases Recession Increases
Aggregate Supply (AS)
Total supply of all goods and services produced in economy.
Measured aswell in Real GDP
We aim to reach full employment. No more, no less.
It increases exponentially because you tend to have less resources as GDP goes up. Prices raise as supply dwindles.
Changes In Aggregate Supply
Like PPC, looks at potential
Changes In Price Of Inputs
Strictly y-axis change.
Supplies are the same, strictly a price change
Change In Amount of Inputs
x and y axis change.
More inputs, shift to right-down.
Less inputs, shift to left-up.
As more resources are available, you run out of them at a later time. Prices will also decrease to account for increase inventory
Change In Efficiency
Same as change in amount of inputs
Equilibrium
