ECON-1010 Chapter Notes - Chapter 10: Aggregate Demand, Aggregate Supply, Graphical Model

• School: Vanderbilt University
• Department: Economics
• Course: ECON-1010
• Professor: Buckles Stephen

Document Summary

Chapter 10: aggregate demand, aggregate supply, and a new equilibrium. [review: the aggregate demand curve shows combinations of price levels and total spending in the economy; changes in the level of prices in the economy will affect spending by causing changes in net exports, consumption, and investment. As prices rise in the us, our exports become more expensive and export spending falls. In addition, consumers will shift some buying to substitute imported goods, which are now relatively cheaper. Total spending in our economy is reduced as a result. The value of wealth in the economy will also be affected. If the real value of wealth decreases, consumers may feel less well-off and reduce consumption spending even if income does not change. As prices increase, the demand for money will increase causing interest rates to rise; investment spending will fall as a result. Part of total spending will thus decrease at each level of income]