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...
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...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are the Keynesian, Intermediate, and Neoclassical Zones in the Aggregate Supply Aggregate Demand Model? We can use the AD/AS model to illustrate both Say’s law that supply creates its own demand and Keynes’ law that...
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...
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,...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Equilibrium Point for Aggregate Supply and Demand? The intersection of the aggregate supply and aggregate demand curves shows the equilibrium level of real GDP and the equilibrium price level in the economy. At a relatively low price level for output,...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Healthy Climate for Economic Growth? While physical and human capital deepening and better technology are important, equally important to a nation’s well-being is the climate or system within which these inputs are cultivated. Both the type of market economy...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Growth Accounting Studies?Growth accounting studies seek to determine the extent to which physical and human capital deepening and technology have contributed to growth. The usual approach uses an aggregate production function to estimate how much of per...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are the Components of Economic Growth?Economic growth is defined as an increase in total product or what is produced in a nation. The c components that give rise to economic growth include: Workforce Human Capital Physical Capital Technology These factor relate...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How are compound growth rates and compound interest rates related?The formula for GDP growth rates over different periods of time is exactly the same as the formula for how a given amount of financial savings grows at a certain interest rate over time, as presented in...
