Can I get some help understanding these questions? It is important to distinguish between changes that areanticipated and unanticipated because the impact on theeconomy will differ between the two. The economy is inlong-run equilibrium when the short-run aggregate supplycurve, aggregate demand curve, and long-run aggregatesupply curve are in equilibrium.What are the major factors causing a shift in aggregatedemand (inward or outward)? What are the major factorsthat will affect short-run aggregate supply? Long-runaggregate supply?Review what factors will lead to a shift in the AD, SAS, andLRAS. An increase in output due to economic growth willincrease both short-run and long-run aggregate supply.Unanticipated changes in either aggregate demand oraggregate supply will disrupt long-run equilibrium and causecurrent output to differ from the economy's long-runpotential.Determinants are things (other than price) that shift demandcurves, to the left or to the right. Are the determinants ofaggregate demand the same things that apply to demand foran individual good?

Answered: It is important to distinguish between…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 4SQP

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Can I get some help understanding these questions?

It is important to distinguish between changes that are
anticipated and unanticipated because the impact on the
economy will differ between the two. The economy is in
long-run equilibrium when the short-run aggregate supply
curve, aggregate demand curve, and long-run aggregate
supply curve are in equilibrium.
What are the major factors causing a shift in aggregate
demand (inward or outward)? What are the major factors
that will affect short-run aggregate supply? Long-run
aggregate supply?
Review what factors will lead to a shift in the AD, SAS, and
LRAS. An increase in output due to economic growth will
increase both short-run and long-run aggregate supply.
Unanticipated changes in either aggregate demand or
aggregate supply will disrupt long-run equilibrium and cause
current output to differ from the economy's long-run
potential.
Determinants are things (other than price) that shift demand
curves, to the left or to the right. Are the determinants of
aggregate demand the same things that apply to demand for
an individual good?

Expert Solution

Step 1

Aggregate demand is defined as the total demand for all the final goods and services produced in an economy at a given period of time at all possible price levels. The components of aggregate demand are the same as the components of gross domestic product because both represent the final value of the goods and services produced in an economy during a given period of time, the components are: consumption expenditure, investment expenditure, government spending, and net exports (exports minus imports). The aggregate demand curve is plotted to show the relationship between output and price level, where output is plotted on x-axis and price level is plotted on the y-axis.

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