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09 March 2018

Explain aggregate demand and aggregate supply




Aggregate demand: Aggregate demand in a relationship between aggregate quantity demanded and the economy’s price level. The amount of final products will be demanded in any given year depends on a variety of factors including:
  •          Price level
  •          Consumer confidence
  •          Wealth
  •          Availability of credit

Aggregate demand curve: Aggregate demand curve is a graph that shows how the amount of aggregate domestic production measured by real GDP, will vary with the price level.


Aggregate supply: Aggregate supply is the relationship between the aggregate quantity of goods and services supplied, real GDP supplied and the price level, the GDP deflator, holding everything else constant.

Aggregate supply curve: The aggregate supply curve shows the relationship between price level and real GDP.






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