4.3 Aggregate Demand and Aggregate Supply analysis

In this chapter you will learn how to:

• define the meaning of aggregate demand (AD)
• explain the components of aggregate demand
• analyse the determinants of aggregate demand
• explain the shape of the aggregate demand curve
• analyse the causes of a shift in the aggregate demand curve
• define the meaning of aggregate supply (AS)
• analyse the determinants of aggregate supply
• explain the shape of the aggregate supply curve in the short run (SRAS) and the long run (LRAS)
• explain the causes of a shift in the AS curve in the short run (SRAS) and in the long run (LRAS)
• identify the difference between a movement along and a shift in aggregate demand and aggregate supply
• explain how equilibrium is established in the AD/AS model and how the level of real output, the price level and employment are determined
• discuss the effects of shifts in the AD curve and the AS curve on the level of real output, the price level and employment.