Download 11.4 Aggregate Demand and Aggregate Supply

11.4 Aggregate Demand and
Aggregate Supply
Objectives
 Explain what is meant by aggregate
output and the economy’s price level.
 Describe the aggregate demand curve
and the aggregate supply curve, and
show how they determine the equilibrium
level of price and aggregate output.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and
Aggregate Supply
Key Terms
 aggregate output
 aggregate demand
 price level
 aggregate demand curve
 aggregate supply curve
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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Aggregate Output
Aggregate output is the total amount of
all final goods and services produced in
the economy during a given period.
Aggregate demand is the relationship
between the average price of aggregate
output and the quantity of aggregate
output demanded.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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4
The Price Level
The price level is a composite measure
reflecting the prices of all goods and
services in the economy relative to prices
in a base year.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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5
Real Gross Domestic Product
After adjusting GDP for price changes, you
end up with real GDP.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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Aggregate Demand Curve
The aggregate demand curve shows the
relationship between the price level in the
economy and the real GDP demanded.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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Aggregate Supply Curve
The aggregate supply curve shows how
much output U.S. producers are willing
and able to supply at each price level.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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Equilibrium
The intersection of the aggregate demand
curve and aggregate supply curve
determines the equilibrium levels of price
and real GDP in the economy.
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
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9
Aggregate Demand Supply
The economy’s
real GDP and
price level are
determined at the
intersection of the
aggregate
demand and
aggregate supply
curves.
Figure 11.9
CONTEMPORARY ECONOMICS
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11.4 Aggregate Demand and Aggregate Supply
U.S. Real GDP and
Price Level Since 1929
SLIDE
10
Figure 11.10
CONTEMPORARY ECONOMICS
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