Download Aggregate supply

Aggregate Supply
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Aggregate supply is the total value of goods
and services that all firms would produce in a
specific period of time at various price
levels.
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Over a one-year period, if all production
takes place within the country’s borders,
aggregate supply equals the GDP.
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An aggregate supply curve shows the amount of
real GDP that would be produced at various
price levels.
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Decreases in the cost of production tend to
increase aggregate supply, and increases in
the cost of production tend to decrease
aggregate supply.
Aggregate Demand
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Aggregate demand is the total demand for every
good and service in the economy at different
price levels.
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The aggregate demand curve represents the sum
of demand from all economic sectors at various
price levels.
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When aggregate demand increases, spending is
increased and the curve shifts to the right,
but when people save more and spend less,
aggregate spending is reduced and the curve
shifts to the left.
Macroeconomic Equilibrium
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Aggregate supply and demand curves can be used
together to analyze how proposed policies
might affect growth and price stability.
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Macroeconomic equilibrium is the point of
intersection between the aggregate supply
curve (AS) and the aggregate demand curve
(AD).
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Macroeconomic equilibrium can change as a
result of changes in either AS or AD.
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Demand-side policies affect the aggregate
demand.
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Supply-side policies affect the aggregate
supply.
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The economy needs a combination of demand-side
and supply-side policies.