We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

How equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework - Essay Example

Comments (0) Cite this document
Summary
In macroeconomics and microeconomics, aggregate supply curve expresses the overall price level in a nation. The aggregate supply curve slopes upward in the short run and nearly vertical in the long run…
Download full paper
GRAB THE BEST PAPER
How equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework
Read TextPreview

Extract of sample
How equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework

Download file to see previous pages... This paper describes the occurrence of the equilibrium using aggregate supply and aggregate demand curves, and the fluctuation of real GDP around the potential GDP with reference to the economy in UK. Aggregate Demand Aggregate demand curve represents the desired spending, consumer behaviour and the buying of equipment by governments and foreigners. The aggregate demand rises with the increase in expenditure caused by increased optimism by the households on lifetime incomes and increased need for the product. The combined monetary assets and the decrease in interest rates stimulate the desire to spend by the firms and households. Low interest rates reduce the saving reward and borrowing costs for households, but for businesses, this reduces the borrowing costs for investing in equipment and plant (James, Walte and James 2006, p. 777-790). The aggregate demand curve slopes downwards due to the fixed nominal value for some assets, particularly the money itself. The increase in prices for the goods with no changes in money leads to the real value of money balances declining and this result to decreased liquidity. The rise in prices increases the demand for dollars in financing the transactions. Short liquidity to the monetary assets results when nominal dollars’ supply does not change. ...
Prices and output are inversely related. Shifts in aggregate demand curve Aggregate demand curve changes due to wealth effects like the money supply, interest rate effects, and the net exports effects. The changes are represented by shifts in aggregate demand curves either to the right, or to the left. A right shift in aggregate demand curve (AD1 to AD2) indicates an increase in GDP at the same price level for the quantity demanded. A left shift (AD1 to AD3) indicates a decreased GDP for the quantity demanded at the same price levels (Justiniano & Claudio 2011, p. 89). Shifts in aggregate demand curve Source:http://www.cliffsnotes.com/study_guide/Aggregate-Demand-AD-Curve.topicArticleId-9789,articleId-9737.html Aggregate Supply Aggregate Supply (AS) model measures volume of the goods and services produced by an economy at given overall price level. The AS curve summarizes the production behaviour for the side markets, and it slopes upwards. The Aggregate Supply curve may be horizontal or vertical depending on the conditions (James, Walte and James 2006, p. 777-790). The curve is inelastic in the long run and elastic in the short run. Therefore, when the long-run curve is vertical, the return is to natural output level as the equilibrating forces pull back to vertical long-run curve. The upward facing slope is caused by changes in firm prices due to the increased demand. In the presence of menu costs, firms raise the prices or increase the production, resulting to aggregate increase in both output and prices (Berrah and Cliville 2007, p.709-719). Graph 2: Aggregate Supply Curve Source: http://www.cliffsnotes.com/study_guide/Aggregate-Supply-AS-Curve.topicArticleId-9789,articleId-9738.html The vertical axis in aggregate supply curve represents the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“How equilibrium occurs using the aggregate supply (AS) and aggregate Essay”, n.d.)
Retrieved de https://studentshare.org/macro-microeconomics/1461997-1-describe-how-equilibrium-occurs-using-the-aggregate-supply-as-and-aggregate-demand-ad-framework-use-this-framework-to-ex
(How Equilibrium Occurs Using the Aggregate Supply (AS) and Aggregate Essay)
https://studentshare.org/macro-microeconomics/1461997-1-describe-how-equilibrium-occurs-using-the-aggregate-supply-as-and-aggregate-demand-ad-framework-use-this-framework-to-ex.
“How Equilibrium Occurs Using the Aggregate Supply (AS) and Aggregate Essay”, n.d. https://studentshare.org/macro-microeconomics/1461997-1-describe-how-equilibrium-occurs-using-the-aggregate-supply-as-and-aggregate-demand-ad-framework-use-this-framework-to-ex.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Aggregate demand and its components
A basis proposition of Keynesian theory is that the equilibrium level of income and output depends on the economy’s aggregate spending for output. If aggregate spending is less then demand will be less and it results in unemployment and less national output.
5 Pages(1250 words)Essay
Aggregate demand and aggregate supply
Aggregate supply on the other hand represents the amount of products that an economy can produce. Under normal circumstances, aggregate demand should equate to aggregate supply. The studying these concepts of aggregate supply and demand helps in understanding macroeconomics at a wider level.
4 Pages(1000 words)Essay
Supply Chain Management and Aggregate Planning
No doubt, supply chain management is the mixture of art and science that goes into improving the ways in which corporation finds raw materials it needs to make a product or service, manufactures that product or service and deliver it to the purchaser. The five basic mechanism of supply chain management are:
3 Pages(750 words)Essay
Aggregate upply
The curve is the representation of the total production launched by the country with reference to the total income gained. From the graph it is concluded that a straight line at an angle of 45o is drawn between the sum of income received and the sum of the production.
4 Pages(1000 words)Essay
What is correlation analysis
Variables in correlation analysis are basically two types- dependent variables and independent variables. The variable that is being predicted or estimated is dependent variable. On the other hand, a variable that provides the basis for estimation, it’s the predictor variable or the independent variable.
28 Pages(7000 words)Essay
Supply, Demand, & Equilibrium
Using real world example, professional sports players are paid much higher than farmers, factory workers, engineers, and teachers even though all of them are generally in competitive markets. In order to assess this situation, this paper will
2 Pages(500 words)Essay
Aggregate Demand or Aggregate Supply
The article was written on 19th March, 2012, a time when consumer prices had consistently gone up over a few months. A declining U.S dollar value triggered increased oil prices in the international markets,
1 Pages(250 words)Essay
Aggregate Demand and Supply Models
As compared to US$126,400 average household income back in 2007, the average household income as of 2010 has reached its lowest point at US$77,300 (Fletcher, 2012). In the study
2 Pages(500 words)Essay
Aggregate demand and aggregate supply
Real values of GDP are adjusted for inflation, but nominal values of GDP are not so adjusted, and therefore the nominal GDP may appear to be higher than the real GDP. Real GDP refers to the total market values of the outputs measured in constant prices, but not
3 Pages(750 words)Essay
Aggregate Demand and Supply Models
Unemployment affects the level of individual income. An increase in unemployment reduces disposable income that hence reduces demand for goods and services. Firms can however hire from the increased pool of unemployed at low wage
1 Pages(250 words)Essay
Let us find you another Essay on topic How equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us