EconomicsCode 9708
Aggregate Demand and Aggregate Supply analysis
What this topic asks you to be able to do
- the meaning given to Aggregate Demand (AD)
- the components of AD, and what each of them stands for: AD = C + I + G + (X – M)
- what determines AD (the components of AD need not be known in detail)
- the form taken by the AD curve (sloping downwards)
- what makes the AD curve shift
- the meaning of Aggregate Supply (AS)
- determinants of AS
- how the AS curve is shaped: in the short run (SRAS) it is an upward sloping line or a sweeping curve; in the long run (LRAS) it is either vertical or made up of three sections, which are highly elastic, upward sloping and vertical
- what produces a shift of the AS curve across the short run (SRAS) and across the long run (LRAS)
- the difference between moving along the curve and shifting the curve for AD and for AS
- how equilibrium is set up within the AD/AS model and how the levels of real output, the price level and employment are found
- the impact that shifts of the AD curve and of the AS curve have on real output, the price level and employment