Macro-Economics - Essay Example

Only on StudentShare

Extract of sample

Aggregate demand is the economy-wide demand for goods and services by all economic agents and aggregate supply is the total goods and services produced. The macroeconomic model of aggregate demand and aggregate supply determines the relationship between aggregate price level and aggregate output in the short run as well as the long run through the interaction of all the markets (Mankiw, 2008).
The aggregate demand curve, that is the relationship between AD and aggregate price level, is drawn for a given supply of money. It slopes downward since higher the price level, lower is the real money balances, on account of the Quantity Theory of Money, and so lower is the demand for goods and services. The aggregate supply curve is the relationship between total goods and services produced in the economy and the price level. The long run AS supply curve is vertical while, in the Keynesian macroeconomic model, the short run AS curve is horizontal since prices are assumed to be sticky in the short run. In the long run, changes in aggregate demand affect prices but in the short run, changes in aggregate demand affects output only.
Keynes proposed that low aggregate demand is responsible for low income and high unemployment that characterize economic downturns. ...
Download paper


In an economy, money flows between economic agents - households, firms and the government - through various markets - the market for goods and services, markets for factors of production and the financial markets. Households receive income and use it to pay taxes to the government, consume goods and services, and to save through the financial markets…
Author : runolfsdottirka

Related Essays

Market Situation and External Environment
The paper will discuss various concepts about micro and macro economics and explain the significance of them in the context of businesses with examples. Among micro-economic theory, one of the most important concepts is supply and demand analysis that is related to analyzing the supply and demand graph to measure the shift of the graph. It is necessary to explain these concepts before describing their importance for businesses. Supply and demand analysis of a business implies looking at the two variables of supply and demand (Gillespie, 2011). Demand can be defined as a phenomenon in which...
8 pages (2008 words) Essay
Macro-Economic Issues
The impact would stem around profitability, efficiency, risks and leverage. At first a brief overview of the UK economy for FY 10, 11, 12 would be given and would then be followed by the effects on Imperial tobacco. Then a speculation would be made as to how Imperial tobacco would respond to these macroeconomic changes based on strategy and corporate objectives of Imperial tobacco. The growth of the UK economy seems sluggish in the aftermath of the financial crisis. The crisis had hit the UK from both eastern and western borders. This includes the housing market crash of US and the Euro Zone...
8 pages (2008 words) Essay
Managerial economics: Wheat market in the United States
This essay seeks to present an objective modern analysis of the factors that determine the current price of wheat on American market.
5 pages (1255 words) Essay
Quantitative and Academic skills in learning Economics
Economics is a comprehensive that studies various aspects of the society and is divided into a number of branches explicitly, microeconomics, macroeconomics, normative, positive economics etc. In the past two decades the erudition of economics has been revolutionized and its theories and ideas have been applied to various other sciences and areas.
5 pages (1255 words) Assignment
How can an understanding of micro- and macro- economics help business deal with their market situation and their external environment?
The paper will discuss various concepts about micro and macro economics and explain the significance of them in the context of businesses with examples.
8 pages (2008 words) Essay
International Business Economics
Thus, economic growth can be measured in nominal terms by taking into concern the factors like inflation and other economic indicators (Barro & Sala-i-Martin, 2004).
16 pages (4016 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!