BBG 101 Lecture Notes - Lecture 7: Shortage, Aggregate Demand, Stock Market

• School: Tunxis Community College
• Department: Business – General
• Course: BBG 101
• Professor: Smith

Document Summary

Inflation occurs when, at the existing price level, there is a mismatch between: (a) what agents want in the aggregate (their plans or goals), and. (b) what they get as a result current economic forces ie what the economy delivers or supplies to them in the aggregate (the outcomes). When reality (b) does not match up to their goals (a), agents take actions in pursuit of their goals which then raise prices, either directly or indirectly. The plans of all agents (a), when combined together, are of two types: (i) the total spending or expenditure plans of agents in buying output (goods and services) (ii) the total income or earning plans of agents in selling their factors of production (e. g. labour which delivers wages; capital which delivers profit etc) The outcomes delivered by the economy (b) are also of two types: (i) the aggregate supply of output (goods and services)