ECN 204 Chapter Notes - Chapter 12: Aggregate Demand, Aggregate Supply, Demand Curve
Document Summary
Ecn 204 chapter 12 aggregate demand and supply. Is a schedule or curve that shows the amounts of a nation"s output (real gdp) that buyers collectively desire to purchase at each possible price level. The relationship between the price level and the amount of real gdp demanded is inverse/ negative. When the price level rises the quantity of real gdp demanded decreases. When the price level falls the quantity of real gdp demanded increases. The inverse relationship between the price level and real gdp is shown where the aggregate demand curve ad slopes downward (as does the demand curve for an individual product) Slopes downward because of the real balance effect, the interest rate effect, and the foreign trade effect. These 3 effects work in opposite directions for a decline in the price level (1) real balances effect. Change in the price level produces the real balance effect.
