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Growth and Recessions – Aggregate Supply and Demand Model

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What causes Growth and Recessions in the Aggregate Demand – Aggregate Supply Model? In the AD/AS diagram, long-run economic growth due to productivity increases over time will be represented by a gradual shift to the right of aggregate supply. The vertical line...

Keynesian Perspective – Aggregate Demand

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Keynesian Perspective of Aggregate Demand?  The Keynesian perspective focuses on aggregate demand. The idea is simple: firms produce output only if they expect it to sell. Thus, while the availability of the factors of production determines a nation’s...

Aggregate Supply and Demand – Macro vs Microeconomics

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Aggregate Supply and Aggregate Demand in Macroeconomics and Microeconomics? Confusion sometimes arises between the aggregate supply and aggregate demand model and the microeconomic analysis of demand and supply in particular markets for goods, services, labor,...

Consumption Expenditure

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Consumption Expenditure? Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods are items that last and provide value over time, such as automobiles. Nondurable goods are things like...

Recessionary and Inflationary Gap

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Recessionary and Inflationary Gap? Keynes argued that, for reasons we explain shortly, aggregate demand is not stable—that it can change unexpectedly. Suppose the economy starts where AD intersects SRAS at P0 and Yp. Because Yp is potential output, the...
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