Aggregate Demand And Aggregate Supply

1154 WordsSep 27, 20165 Pages
There is nothing so frustrating as not being able to answer a single question at the end of a study week. But being able to make a brief summary, on the other hand, will steer you up. This week work was in the domain of aggregate demand and aggregate supply: the long run and the short run, recessionary and inflationary gaps and long-run economic equilibrium, determining the level of consumption and aggregate expenditures and aggregate demand. I have been able to retain that aggregate demand is the total quantity of goods and services that a household, foreign buyers, and governments will buy at a given price level. A shift to the left of the aggregate demand indicates a fall in price, output returning to normal pushing it again to the right. Unlike the aggregate supply which is curve showing any combination of inflation and the real output which companies are ready to offer base on their production cost, will witness a shift to the left in the short-run as a result of price rise and falling output. In the long-run, the potential output is vertical line independent on inflation resulting in a flexible price of output and input. Reflecting on the subject of Recessionary and Inflationary Gaps, and Long-run Economic Equilibrium, I am able to retain that recessionary gaps exist if real GDP is less than Potential real GDP. At this point in time, the unemployment rate is greater than the natural rate of employment cause job seekers to settle for lower wages. The situation at
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