Aggregate Supply and Demand
Aggregate Supply and Demand
Francis F Perkins
ECO/372
April 10, 2013
Ed Mendicino
Aggregate Supply and Demand
Aggregate demand is the total demand for goods and services in the economy at any given time and price level. It is the quantity of goods and services in the economy are now and in the future purchased at possible price levels. This is the demand for gross domestic products (GDP) of a nation when supply levels are fixed. The aggregate demand is a downward slope on a model because at lower price levels a greater amount is wanted.
Aggregate supply is the total supply of goods and services that business is in an economy plan on selling in an exact time. It is the total amount of goods and services, companies are willing to sell at a specified price level in an economy (Sexton, 2005).
The high unemployment that the United States is experiencing reflects an underperformance of aggregate demand. Despite three-quarters of growth, the real GDP is 6 % below its trend path. Unemployment is high because the economy is producing below its ability. Long-term unemployment is at record levels is a sign the high unemployment rate is the result of fundamental issues. Now 6.5 million workers have been out of work more than two years. These workers represent 44% of the unemployed. Unemployment over a long time is harder on the economy than short-term (Romer, 2010)
Long-term unemployment can be explained by the breakdown of aggregate demand. When job rates are low, employees who lose their jobs are hard pressed to find work quickly and are more likely to become long-term unemployed. There is every reason to expect long-term unemployment will decrease as the aggregate demand recuperates. What has happened is the recession has shifted workers in the category of long-term unemployment. Long-term unemployed workers spent less money than others did, which causes the aggregate demand to decrease. This in turn will cause more unemployment and any increase in demand will
Francis F Perkins
ECO/372
April 10, 2013
Ed Mendicino
Aggregate Supply and Demand
Aggregate demand is the total demand for goods and services in the economy at any given time and price level. It is the quantity of goods and services in the economy are now and in the future purchased at possible price levels. This is the demand for gross domestic products (GDP) of a nation when supply levels are fixed. The aggregate demand is a downward slope on a model because at lower price levels a greater amount is wanted.
Aggregate supply is the total supply of goods and services that business is in an economy plan on selling in an exact time. It is the total amount of goods and services, companies are willing to sell at a specified price level in an economy (Sexton, 2005).
The high unemployment that the United States is experiencing reflects an underperformance of aggregate demand. Despite three-quarters of growth, the real GDP is 6 % below its trend path. Unemployment is high because the economy is producing below its ability. Long-term unemployment is at record levels is a sign the high unemployment rate is the result of fundamental issues. Now 6.5 million workers have been out of work more than two years. These workers represent 44% of the unemployed. Unemployment over a long time is harder on the economy than short-term (Romer, 2010)
Long-term unemployment can be explained by the breakdown of aggregate demand. When job rates are low, employees who lose their jobs are hard pressed to find work quickly and are more likely to become long-term unemployed. There is every reason to expect long-term unemployment will decrease as the aggregate demand recuperates. What has happened is the recession has shifted workers in the category of long-term unemployment. Long-term unemployed workers spent less money than others did, which causes the aggregate demand to decrease. This in turn will cause more unemployment and any increase in demand will
References: Colander D. C. (2010) Macroeconomics (8Th Ed) Boston, MA McGraw Hill/Irwin ^ Keynes, John Maynard (2008). The General Theory of Employment, Interest and Money. Chapter 19: Sexton, Robert; Fortuna, Peter (2005) Exploring Economics ISBN 0-17-641482