|
Almost everyday we can find news
about unemployment (UE), inflation (IN), and economic growth
(EG). People discuss these issues over coffee and
presidential candidates discuss them during debates. Our
elected leaders consider them in pieces of legislation. How
can we gain a better understanding of the causes of
unemployment, inflation, and economic growth so that we can
better understand these discussions? To economists the
answer is the Aggregate Demand / Aggregate Supply model of
the macroeconomy.
In this lesson we will add aggregate
supply to our aggregate demand graph (lesson 12a) and use
the combined graphs to find the equilibrium level of real
GDP (output) and price level. We will see what causes the
equilibrium level of real GDP (output) and price level of an
economy to change (the determinants of AD and AS), and we
will use such changes to gain a better understanding of the
causes of UE, IN, and EG.
So the next time you hear a
politician discuss what they plan to do about UE, IN, and
EG, you will have a much better understanding of what the
are saying.
|
