Macro 2 AD-AS Flashcards
What is aggregate demand?
Total of all demands or expenditures in the economy at any given price
What is aggregate supply?
Total output from an economy’s goods and services
Why does AD shift inwards?
Higher unemployment
Fall in house prices then bursting of value
Strong pound
Brexit fall in exports, less investment
Why does AD shift outwards?
Less saving, fall in household savings ratio
Expanding population
Rise in gov spending
Fall in interest rates
Why does consumption change?
Disposable income
Interest rates
Consumer confidence
Wealth effects
What is the wealth effect?
Getting a bit richer and getting gassed and spending more
Because house price, income, confidence etc
What affect SRAS?
Changes in cost of raw materials, energy
Change in exchange rates (changes costs)
Change in tax rates (changes costs)
What is SRAS?
Total planned output when prices can change but productivity of factor inputs remain constant
What is LRAS?
Total planned output when prices and wage rates can change
Is a measure of country’s potential output
