Aggregate Demand/Supply Flashcards
What is aggregate demand?
The total spending on goods and services
Why do we use aggregate demand?
To measure how much money is being spent by all stakeholders and people overseas
What is the formula for calculating AD?
AD= C + I + G + (X-M) C-consumer expenditure I- capital investment G- government spending X-exports M- imports
On the AD curve, what does a fall in price level cause?
A expansion of AD
On the AD curve, what does a rise in price level cause?
A contraction of AD
What is aggregate supply?
The total quantity of goods and services that the country’s firms and governement produce at a given price level.
What are the factors that can affect AS?
Quantity/quality of factors of production Wages Preoductive capacity Prices of raw materials Taxation
What does the AS curve show?
The quantity of goods and services that would be produced at different price levels
What is SRAS?
The relationship between real GDP and the price level which shows how the economy can generate in the short term at each price level
What should a rise in price level stimulate? SRAS
An expansion of supply
What causes either a contraction on expansion on the AS curve?
Changes in aggregate demand
Which was does the SRAS curve slope?
Upwards
