Assignment:
AGGREGATE DEMAND
The article is about managing aggregate demand, it was written by Paul Krugman in the year 2015. The article is about second –best macroeconomics. it shows that there is a paradox about the economic policy since the great recession.
The economic problems that United States and Europe are facing are quite straight forward. The economic problems are due to the policies which are imposed by the countries which are torturing and confusing to the citizens of the country.
Western world is suffering from a severe shortfall of aggregate demand which is due to misalignment of national costs and prices which makes the aggregate demand to be low.
The countries are trying to increase the aggregate demand by regulating their fiscal policy and the rate of inflation. There is a need for any country facing aggregate demand shortfall to come up with solutions that will make the aggregate demand to increase.
Aggregate demand represents the sum of demand by foreign households and organizations present in the economy which has scarce resources then remove the amount of goods and services demanded by households which are domestic as well as those from abroad. Aggregate is found by adding up the value of all the individual components at the various average prices.
Components in the aggregate demand are inversely related to the price except imports which is also part of the aggregate demand. The curve that shows aggregate demand indicates the how aggregate demand and the price level of the commodities relate.
The curve slopes down because all the components of the aggregate demand are inversely related to the price of commodities apart from imports.
Aggregate demand is the total amount of money given out to get the goods and services in the economy. It equals to the gross domestic product of the country in long run equilibrium this is because they share the same equation.
References:
AGGREGATE DEMAND. (n.d.). SpringerReference.
Managing service demand. (2013). Managing Service Demand
McCormick, K., & Rives, J. M. (1998). Aggregate Demand in Principles Textbooks. Aggregate Demand and Supply