Short-run Macroeconomic Equilibrium Below or Above Full Employment
Short-run macroeconomic equilibrium only occurs when the amount of real GDP demand equals the amount of GDP supply. On a graph, this happens at the point where the AD curve intersects the short-run average supply curve, exactly on the long-run…
Long-run Full Employment, Recessionary Gap, Inflationary Gap, and Stagflation
Long-run Full Employment Long-run full employment equilibrium occurs when the aggregate demand (AD) curve cuts the short-run aggregate supply curve (SRAS) at a point on the long-run aggregate supply curve (LRSS): Since the intersection occurs at a point on the…
Fluctuations in Aggregate Demand and Supply
Economists believe that business cycles and fluctuations in GDP levels result from a shift in the aggregate demand or supply curve. The Business Cycle The business cycle (economic expansions and contractions) is mainly caused by changes in the short-run value…
Movements along and Shifts in Aggregate Demand and Supply Curves
Aggregate demand (AD) and aggregate supply (AS) curves address economic issues such as expansions and contractions of the economy, causes of inflation, and changes in unemployment levels. Movements along these curves are caused by price level variations, while shifts…
Aggregate Supply
[vsw id=”XDs9kjMPKTo” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Aggregate supply refers to the total amount of goods and services that firms in an economy are both willing and able to sell at a given price level. We must differentiate between the short-…
Measures of Central Tendency
Measures of central tendency are values that tend to occur at the center of a well-ordered data set. As such, some analysts call them measures of central location. Mean, median, and mode are all measures of central tendency. Even then,…
Nominal GDP, Real GDP and GDP Deflator
It is economically healthy to exclude the effect of general price changes when calculating the GDP. This is because higher (lower) income caused by inflation does not indicate a higher (lower) level of economic activity. Real GDP Economists describe real GDP…
