Aggregate Demand and Supply

In most years production of goods and services rises. On average over
the past 50 years, production in the U.S. frugality has grown by about 3
percent per year. In around years normal growth does non occur, causing
a recession.

- A recession is a period of declining corporeal GDP, falling incomes, and
uprising unemployment.
- A depression is a severe recession.

2.1 particular 1: stinting Fluctuations are Irregular and Unpredictable

- Economic fluctuations are sec and unpredictable.
- Fluctuations in the economy are often called the business cycle.

2.2 Fact 2: Most macroeconomic variables fluctuate together

· Most macroeconomic variables that measure some type of income or
production fluctuate closely together.

· Although many macroeconomic variables fluctuate together, they
fluctuate by assorted amounts.

2.3 Fact 3: As output falls, unemployment rises

- Changes in real GDP are inversely related to changes in the
unemployment rate.

- During clock of recession, unemployment rises substantially.

3. Explaining Short Run Economic Fluctuations

- Most economists believe that simple theory describes the world in
the long run but not in the short run.

3.



1 How the Short Run Differs from the Long Run

- Changes in the money supply affect nominal variables but not real
variables in the long run.

- The assumption of monetary neutrality is not appropriate when
studying year-to-year changes in the economy.

3.2 The Basic Model of Economic Fluctuations
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Two variables are subprogramd to develop a computer simulation to analyze the short-run
fluctuations:

- The economys output of goods and services mensural by real GDP.
- The overall price level careful by the CPI or the GDP deflator.

Economist use the model of aggregate demand and aggregate supply to
apologize short-run fluctuations in economic activity around its
semipermanent trend.

4. The Aggregate Demand Curve

The aggregate demand curve shows...If you need to get a full essay, order it on our website: Orderessay



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