Key points
Aggregate supply is the total quantity of output firms will produce and sell—in other words, the real GDP.
The upward-sloping aggregate supply curve—also known as the short run aggregate supply curve—shows the positive relationship between price level and real GDP in the short run.
The aggregate supply curve slopes up because...
Key points
Aggregate supply is the total quantity of output firms will produce and sell—in other words, the real GDP.
The upward-sloping aggregate supply curve—also known as the short run aggregate supply curve—shows the positive relationship between price level and real GDP in the short run.
The aggregate supply curve slopes up because...
Key points
Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports.
Consumption can change for a number of reasons, including movements in income, taxes, expectations about future income, and changes in wealth levels.
Investment can change in response to its expected profitability, which in turn is shaped by...
Key points
Gross national product, or GNP, includes what is produced domestically and what is produced by domestic labor and business abroad in a year.
National income includes all income earned: wages, profits, rent, and profit income.
Net national product, or NNP, is GNP minus depreciation.
Depreciation is the process by which capital ages...
Lesson summary
Changes in the supply of or demand for a currency will cause that currency to appreciate or depreciate. The demand for a currency changes based on other countries' wanting to buy goods, services, or assets using that currency. The supply of a currency changes based on how much people using that currency want the goods, services, or assets in other countries....
Key points
A payment is said to be indexed if it is automatically adjusted for inflation.
An adjustable-rate mortgage is a loan used to purchase a home in which the interest rate varies with market interest rates.
Cost-of-living adjustments are a contractual provision that wage increases will keep up with inflation.
Indexing and...
Key points
A payment is said to be indexed if it is automatically adjusted for inflation.
An adjustable-rate mortgage is a loan used to purchase a home in which the interest rate varies with market interest rates.
Cost-of-living adjustments are a contractual provision that wage increases will keep up with inflation.
Indexing and...
Key points
The aggregate demand/aggregate supply model is a model that shows what determines total supply or total demand for the economy and how total demand and total supply interact at the macroeconomic level.
Aggregate supply is the total quantity of output firms will produce and sell—in other words, the real GDP.
Aggregate demand is the...
Key points
The short-run aggregate supply, or SRAS, curve can be divided into three zones—the horizontal Keynesian zone, the vertical neoclassical zone, and the upward sloping intermediate zone in between the Keynesian and neoclassical zones.
Keynes’ Law states that demand creates its own supply; changes in aggregate demand cause changes in real GDP and...
Key points
Keynes’ Law states that demand creates its own supply.
Say’s law states that supply creates its own demand.
Many mainstream economists take a Keynesian perspective—emphasizing the importance of aggregate demand—for the short run and a neoclassical perspective—emphasizing the importance of aggregate supply—for the...
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