Assignment: Aggregate Demand and Aggregate Supply
The Discussion topics deal with aggregate demand and aggregate supply, and the introduction to basic concepts in open-economy macroeconomics. The specific areas of discussions are the AS-AD model, AS and AD curves, macroeconomic goals, macroeconomic equilibrium, shocks in AS and AD demand, and key concepts in open-economy macroeconomics.
Respond to two of the following Discussion topics.
Topic 1: Aggregate Supply (AS) and Aggregate Demand (AD) model and AS/AD curves are essential to understand macroeconomic fluctuations (business cycles).
a. Discuss the importance AS-AD model in explaining the macroeconomic conditions of the economy and business cycles like recessions.
b. What factors shift AS and AD curves? How do you explain macroeconomic fluctuations using AS-AD model and AS/AD curves?
Topic 2: Macroeconomic goals and macroeconomic equilibrium are the key elements in macroeconomics.
a. What are the long-run macroeconomic goals? What is long-run macroeconomic equilibrium? How the goals are relate to the macroeconomic equilibrium?
b. Suppose that consumers and investors become pessimistic about the future health of the economy. What will happen to aggregate demand and to output?