The introduction part points out that some of the basic economic factors like price, income and unemployment can largely affect the whole social and political systems within a country.
The body part of the paper analyses aggregate demand curve and aggregate supply curve, with emphasis on how price and other determinants like technology, consumer spending and wealth, exchange rate, investment and government spending etc affect aggregate demand and aggregate supply curve. With the help of diagram, the paper emphasizes that the curve of aggregate demand will always be downward sloping because of major three factors that are real-balance effect, interest rate effect and foreign purchase effects (McConnel and Brue, 194- 195). With the help of both short run and long run aggregate supply curves, the paper addressed key factors that can shift the curves.
The paper concludes with opinions from author’s point of view and with suggestions for conducting further analysis on the effects of exchange rates and impacts of unused resources on long run aggregate supply