ECON 1BB3 Chapter Notes - Chapter 5: Menu Cost, Exchange Rate, Aggregate Supply
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ECON 1BB3 Full Course Notes
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Chapter 14: short run economic fluctuations: aggregate demand and aggregate. Model of aggregate demand and aggregate supply: the model that most economists use to explain short-run fluctuations in economy activity around its long-run trend. Aggregate-demand curve: a curve that shows the quantity of goods and services that households, firms, and governments want to buy at each price level. Price level and consumption: the wealth effect: a decrease in price level makes consumers wealthier, which in turn encourages them to spend more. The increase in consumer spending means a larger quantity of goods and services demanded. Conversely an increase in price level reduces the real value of money, in turn reducing wealth, consumer spending and the quantity of goods demanded. Aggregate supply curve: a curve that shows the quantity of goods and services that firms choose to produce and sell at given price level.