Aggregate Demand

Submitted By mgaunnac
Words: 490
Pages: 2
Open Document
Aggregate demand and aggregate supply--Aggregate demand curve is a curve that shows the quantity of goods and services that households (C), firms (I), Government (G), and customers abroad (Exports-Imports) want to buy at each price level. Aggregate demand slopes downward because: Wealth Effect, Interest rate effect, Exchange rate effect. Shift in Aggregate Demand (AD). AD increases in (shifts to the right) when Consumption, Investment, Government spending, or Net Exports increase. Aggregate supply curve is a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level. Sticky wage theory: Nominal wages may increase at the expected rate of inflation. Sticky price theory: Some prices adjust slowly because of menu costs. What shifts the long run supply will shift the short run supply curve plus sellers price expectations. An increase in the expected price level decreases the short run supply curve since firms and workers are likely to agree to higher wage increases which raises the cost of production. Long run equilibrium is where all three curves (AD, LRAS and SRAS) cross. Comparative Advantage-- economics is the study of scarcity (can’t get all for free, have to make choices, resources [land, labor, capital, entrepreneurship] are limited) and choice (decide what to do and not do). Comparative advantage means that an individual or country can produce at a lower opportunity cost than another producer-When individuals and countries specialize in their comparative advantage and trade, they can consume beyond their production possibilities frontiers. Perfect competition, Costs--Short run-Time before firms have enough time to enter or exit an industry. Long run-Firms have enough time to exit or leave an industry. Economic profit=total revenue-(explicit costs+implicit costs). Total revenue=price times quantity. Total costs include both explicit costs [costs that require a money expenditure such as wages and rent] and implicit costs [costs that
Show More

Related Documents: Aggregate Demand

Econ Notes Essay

ECON NOTES The primary authority for software revenue recognition is AICPA Statement of Position (SOP) No. 97-2, Software Revenue Recognition, which is the result of about 12 years of development work from 1985 through 1997. It applies to both public companies (according to SAB 104) and private enterprises. Under SOP 97-2, recognition of revenue generally occurs at delivery if a four-part conjunctive test is met. Software delivery should be straightforward and require no special production, modification…

Words 498 - Pages 2

College Econ Notes Essay

Econ Chapter 2 Notes Three Economic Questions: What goods and services should be produced? -Not just your basic needs and wants - Need to decide how much of the available resources should be devoted to other things -Schools -National Guard 2. How should those goods and services be produced? -All things require land, labor, and capital - These things can be combined in different ways - What is the most efficient way? 3. Who consumes these goods and services…

Words 1581 - Pages 7

econ 307 notes Essay

MONEY AND BANKING CHAPTER ONE Why Study Money, Banking, and Financial Markets I. Why Study Financial Markets. A. The Bond Market and Interest Rates. 1. Financial Markets. Markets in which funds are transferred from people who have an excess of available funds to people who have a shortage. 2. Security. (Financial instrument) claim on issuer’s future income or asset. 3. Asset. Any financial claim of property that is subject to ownership. 4. Bond. Is a debt security that promises to make…

Words 711 - Pages 3

Notes econ 462 Essay

Interest Rate Arbitrage 462 10/14/2013 Exchange rate risk and int. business 1. Overseas operations a. Country a – sales and profits b. Country b – sales and profits c. Country c – sales and profits Consolidated financials would have to take into consideration the exchange rate of each country at a given time. If exchange rates are unfavorable then the consolidated profits will be hurt. If a US business buys from a foreign business exchange rate must be accounted for. If an on delivery…

Words 408 - Pages 2

Essay Econ 301 Mircoeconomics Notes

1/2 X½-1 = 1/2X-½ Y½ MU of Y = dU/dY = X½ 1/2 Y ½-1 SEE NOTEPAPERS dy/dx= Change in y when x changes by a little bit. Derivative= slope of indifference curve So, MS= dy/dx Budget Constraint Income: I Price: Px Quantity of X Consumed: Qx See NOTES…

Words 1275 - Pages 6

ECON TEST 2 STUDY NOTE Essay

Chapter 7- Consumers, Producers & the Efficiency of Markets Willingness-to-pay: the maximum amount that a buyer will pay for a good. Producer Surplus Consumer Surplus = Value to buyers – Amount buyer pays and Producer Surplus = Amount sellers receive – Cost to sellers Since amount buyer pays = amount sellers receive Total Surplus = Consumer Surplus + Producer Surplus or Total Surplus = Value to buyers – Cost to sellers Total Surplus is…

Words 2011 - Pages 9

Principles Of Econ 202

Professor Yamin Ahmad, Principles of Macroeconomics – ECON 202 Economics 202 Professor Yamin Ahmad, Principles of Macroeconomics – ECON 202 The Federal Reserve System Principles Of Macroeconomics Professor Yamin Ahmad Supplemental Notes to Monetary Policy • The Federal Reserve System • The Federal Reserve System, or the Fed, is the central bank of the United States. • A central bank is the public authority that regulates a nation’s depository institutions and controls the quantity of money…

Words 3369 - Pages 14

Essay Matrix Algebra & Automatic-Matrices!

very fast to do lots of things, but fast doesn’t always equal correct! It’s for this reason that we have gone through matrices ‘by hand’ to a point to begin with, so that we can actually uncover when the computer is telling us fibs! 1 ECON 1202/ECON 2291: QABE c School of Economics, UNSW Agenda 1. A little more on Matrix Algebra. 2. Using computers to do Matrix Maths: • Small operations; • Linear equations; • Big operations. 2 More on Matrix Algebra HPW 6.1-6.3 Definition…

Words 849 - Pages 4

Finance Major Checklist Essay

for students admitted as of Fall 2008 - Present First Semester Credits Second Semester Credits FRESHMAN YEAR Microeconomics, ECON 151* 3 Social/Behavior Science Elective 3 Calculus I, MATH 221* 3 Critical Reading/Writing, ENGL 110* 3 Basics of Business, BUAD 110% 3 Macroeconomics, ECON 152* 3 Social/Behavior Science Elective 3 Humanities Elective 3 Natural Science 3 Natural Science with Lab 4 15 16…

Words 2439 - Pages 10

the essay of life

Department of Economics and Finance School of Business Administration Montclair State University Econ 207-01 Course Outline Instructor: Ram Sewak Dubey Fall 2014 Office Hours: MW 4:30pm-5:30pm, M 12:45pm -1:45pm Office: 422, Partridge Hall Phone: 973-655-7778 Email: dubeyr@mail.montclair.edu Lecture Schedule: MW 11:30am-12:45pm Location: PA 114 I Note on Office Hours: I understand that these office hours may conflict with your class schedules. This should not come in the way of learning.…

Words 1189 - Pages 5