AD & AS (chapter 4)

Aggregate Demand- the total demand for a country's goods and services at a given price level and in a given time period.
AD(aggregate demand)
=
Consumer expenditure
+
Investment
+
Government spendings
+
(eXports
-
iMports)

Price Level -  the average of each of the prices of all the products produced in an economy.
Consumer expenditure - spending by households on consumer products.
Government spendings - spendings by the central government and local government on goods and services.
Exports - products go out of the country.
Imports - products go in the country.

Consumer expenditure includes:
-Real Disposable Income (after tax, benefits and inflation)
-Wealth (more people-more spendings)
-Consumer Confidence (how optimistic consumers are about future economic prospects)
-The Rate of Intrest
-The Age Structure Of The Population
-Distribution Of Income (from rich to poor)

-Inflation - rise in price level.

Aggregate Supply - the total amount that producers are willing and able to supply at a given price level in a given time period.

Real GDP- AFTER INFLATION!!!!!


Inflation:


If Demand ShiFts to the left - DEFLATION
If Demand ShiFts to the right - Demand Pull Inflation


If Supply ShiFts to the left- Cost Push Inflation
If Supply Shifts to the right - Economic Growth