...Pick two determinants of aggregate demand that you believe have the greatest impact on macroeconomic performance, and do the same for aggregate supply. Justify your choices with examples for each. When speaking about AD/AS we must take in consideration the involvement of these two in the long run and short run. The two determinants of aggregate demand and supply that I believe have the most impacts on Macroeconomic performance are: 1) Fiscal policy: Increase or decrease of government spending. If they increase and spend money, (Explanation) it could permit the government to create roads per say… or it could create more jobs… The government can to reduce peoples taxes, so they can have more money for them to spend money. Fiscal policy can move aggregate demand. The American government takes responsibility of the fiscal policy, which directly affects Aggregate demand. 2) Monetary policy: Is conducted by the Federal Reserve. 7 people that are appointed by the president and must be approved by congress conduct the Federal Reserve’s Boards of governor. The president has a small say about decisions that are taken within the Federal Reserve. The Feds affect the growth rate of the money supply. They have a direct effect on the economy, which affects interest rates; this directly affects aggregate demand. Example: If there is a decrease in Taxation there will be an increase in supply for producer. The economy can adjust by itself but it takes too long, but because of...
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...Introduction of China economics…………………………………………..…..….4 Summary of article…………………………………………………………………...….4 Aggregate supply (AS) models……………………………………………………..…5 Aggregate demand (AD) models………………………………………………..….....6 Government policies to overcome above problems and effectiveness…………7 Conclusion…………………………………………………………………………………..8 Reference list…………………………………………………………………………………9 Introduction of China economics China’s economy is rapidly huge and expanding in these years. It is the fourth largest country in area after Russia, Canada and USA has experienced multifarious changes in its economic system which has seen it become the second largest economy in the world after USA if measured on the Purchasing Power Parity (PPP) scale. However, China still considered as an emerging economy as per capita incomes fall in the lower-middle level, China is making its presence felt in the global stage by taking big strides in opening up its economy to international trade. There are many economic problems faced by China during the years. And the inflation has become a serious challenge for the developing economy; the surplus of population and the rising unemployment rate and price. According to statistics, more than 250 million migrant workers and their dependents had removed to urban areas to find work. Hence, as China’s economy slows down due to falling external and internal demand, a number of 6.8 million new college graduates poured in to the job market in 2012, China’s unemployment...
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...elements, we are able to determine how each affects aggregate supply and demand. We also developed a set of recommendations for the U.S. president regarding government spending and taxes based on the economic factors’ current state. This will help to better understand all concerns and improvements that should be considered. Unemployment is a key issue many in the US wants confronted. Although the unemployment rate has lowered recently, as of August 2014, it stands at 6.1 percent, a decrease of .5 percent from January 2014 (“United States Department of Labor,” 2014). Records show that each year, since 2009, when the average unemployment rate was 9.2, it has steadily decreased, where at the end of 2013, the average unemployment rate for the year was 7.3, (“United States Department of Labor,” 2014). The reason these numbers are important is because unemployment is directly linked to the state of the economy and aggregates supply and demand. When people are unemployed, they have less money to spend and will most likely hoard their money instead of spending it on luxury items. Since people have less money, this could mean there is less demand in the economy, which shifts the aggregate demand curve to the left. According to “Investopedia,” (2014), aggregate demand is defined as “the total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve,...
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...Aggregate Demand and Supply Models ECO/372 Aggregate Demand and Supply Models The following report will detail out the current state of the U.S. Economy. The report will discuss the following: * Current economic state in regards to unemployment, expectations, consumer income and interest rates * The existing effect of the economic factors on aggregate demand and supply * Fiscal policies that are currently being recommended by government leadership * The effectiveness of those fiscal policy recommendations from the Keynesian and Classical model perspectives. Unemployment rates fluctuate when the supply and demand for human resources are out of balance. The supply and demand are a result of the interaction of economic, policy and structural factors. Economic factors affect both supply and demand. The demand for goods and services increases production which results in the demand for workers, increasing the employment rate. The common thought among economists is that market-driven economies move in cycles and when they drop below certain levels unemployment may result. The moving of production from high wage countries to low wage countries is another factor that increases unemployment. A declining manufacturing sector will result in not enough jobs to go around along with third world competition. While new jobs are being created in the technology and service sectors it is not enough to make up for the amount of jobs that have been lost due to moving...
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...long-run average growth rate of real GDP. the rate of money growth should be set at 4 percent per year. for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2 percentage point gap between potential and actual GDP. The demand for Federal funds is upsloping. downsloping. vertical. horizontal. Generally, the prime interest rate: is highly inflexible downward. remains constant over long periods of time. moves in the same direction as the Federal funds rate. moves in the opposite direction as the Federal funds rate. Which of the following statements is correct? Interest rates and bond prices vary directly. Interest rates and bond prices vary directly during inflations and inversely during recessions. Interest rates and bond prices are unrelated. Interest rates and bond prices vary inversely. (Last Word) Other things equal, a restrictive monetary policy during a period of demand-pull inflation will: increase productivity, aggregate supply, and real output. increase the interest rate, reduce investment, and reduce aggregate demand. lower the price level, increase investment, and increase aggregate demand. lower the interest rate, increase investment, and reduce net exports. (Consider This) The Fed is like a sponge in that it can: wash the "windows" of the banking system so that monetary policy is more transparent. wipe away inflation when used with the "soap"...
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...Aggregate Demand and Supply Models The US economy is highly dynamic and subject to a wide range of economic forces. Based on the latest economic data, our learning team will analyze the forces that drive the economy of the United States. The analysis will cover the following topics: • Macroeconomic topics related to unemployment, expectations, consumer income and interest rates • Factors that control the aggregate demand and supply in the United States • Government leaderships choices regarding • Additional recommendations based on Keynesian and Classical model perspectives. Unemployment rates fluctuate when the supply and demand for human resources are out of balance. The supply and demand are a result of the interaction of economic, policy and structural factors. Economic factors affect both supply and demand. The demand for goods and services increases production which results in the demand for workers, increasing the employment rate. The common thought among economists is that market-driven economies move in cycles and when they drop below certain levels unemployment may result. The moving of production from high wage countries to low wage countries is another factor that increases unemployment. A declining manufacturing sector will result in not enough jobs to go around along with third world competition. While new jobs are being created in the technology and service sectors it is not enough to make up for the amount of jobs that have been lost due to moving the manufacturing...
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...Teresa VanLoke Eco -111 October 17, 2013 Aggregate supply is a type of economics that tries to improve the productive capacity of the economy. A.S (aggregate supply) usually associated with monetarist or free market economics. These type of economics try to pinpoint the benefits of making markets, such as labor markets more flexible then they already are. Some supply side policies involve more government intervention to overcome failures. Benefits of the supply side include: lower inflation, lower unemployment, improved economic growth, and improved trade and balance of payments.in supply side to receive lower inflation you must first find a way to make prices lower, to achieve this you must shift everything to the right. The next benefit to the supply side is lower unemployment. For lower unemployment the supply side policies need to reduce frictional, structural, and real wage unemployment.it would then help reduce the rate of unemployment. Another benefit to supply side is improved economic growth. The supply side policies will increase the rate of economic growth by increase with the increase of aggregated supply. The last benefit of the supply side is improved trade and balance. To improve trade and balance and trade you must make companies more productive and competitive. When they become more competitive they will in turn export more. The weaknesses of the supply side include violating people’s morals, it’s only for the short run, and it doesn’t always work the way...
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...IN THIS CHAPTER YOU WILL . . . Learn three key facts about shor t-run economic fluctuations Consider how the economy in the shor t run dif fers from the economy in the long run A G G R E G AT E AND DEMAND S U P P LY Use the model of aggregate demand and aggregate supply to explain economic fluctuations A G G R E G AT E Economic activity fluctuates from year to year. In most years, the production of goods and services rises. Because of increases in the labor force, increases in the capital stock, and advances in technological knowledge, the economy can produce more and more over time. This growth allows everyone to enjoy a higher standard of living. On average over the past 50 years, the production of the U.S. economy as measured by real GDP has grown by about 3 percent per year. In some years, however, this normal growth does not occur. Firms find themselves unable to sell all of the goods and services they have to offer, so they cut back on production. Workers are laid off, unemployment rises, and factories are left idle. With the economy producing fewer goods and services, real GDP and other measures of income fall. Such a period of falling incomes and rising 413 See how shifts in aggregate demand or aggregate supply can cause booms and recessions 414 PA R T E I G H T S H O R T - R U N E C O N O M I C F L U C T U AT I O N S recession a period of declining real incomes and rising unemployment depression a severe recession unemployment is...
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...Aggregate Demand and Supply Models Karen Burke ECO/372 January19, 2015 Neal Johnson Aggregate Demand and Supply Models Unemployment rates are considered an economic factor because of the effect that these rates have on the general economy. These rates affect not only individual households but communities as well, sometimes on quite a large scale. Unemployment affects demand by shifting the aggregate demand curve to the left. There are fewer consumers creating a demand for goods and services. This could also affect those who supply goods in services in that there will be less demand for that particular business and could lead to more unemployment. Unemployment shifts the aggregate supply curve to the left as well. The current U.S. unemployment rate stands at 5.60 percent as of December 2014 (tradingeconomics.com 2015). This number is down from 5.80 percent is November 2014. There are some analysts who believe that demand is responsible for causing restraints within the U.S. economy. According to Mark Thoma of MoneyWatch “This is an important debate because if the fall in unemployment is mostly structural, there's little that monetary and fiscal policy can do to help to speed the recovery. But if lack of demand is the main culprit, then replacing the lost demand through aggressive policy can help us recover faster.” (cbsnews.com 2012). Therefore it is recommended that the government keep tax rates as the currently stand. Increasing the amount of taxes paid could lead to...
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...is so deep that many economists already call it a depression. The purpose of this paper is to explain how the Keynesian concepts of aggregate demand and fiscal policy that I learned in the macroeconomics classes...
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...Aggregate Demand This section gives you a platform for understanding issues such as inflation, economic growth and unemployment. Aggregate demand (AD) and aggregate supply (AS) analysis provides a way of illustrating macroeconomic relationships and the effects of government policy changes. Aggregate Demand The identity for calculating aggregate demand (AD) is as follows: AD = C + I + G + (X-M) Where C: Consumers' expenditure on goods and services: This includes demand for consumer durables (e.g. washing machines, audio-visual equipment and motor vehicles & non-durable goods such as food and drinks which are “consumed” and must be re-purchased). Household spending accounts for over sixty five per cent of aggregate demand in the UK. I: Capital Investment – This is investment spending by companies on capital goods such as new plant and equipment and buildings. Investment also includes spending on working capital such as stocks of finished goods and work in progress. Capital investment spending in the UK typically accounts for between 15-20% of GDP in any given year. Of this investment, 75% comes from private sector businesses such as Tesco, British Airways and British Petroleum and the remainder is spent by the public (government) sector – for example investment by the government in building new schools or investment in improving the railway or road networks. So a mobile phone company such as O2 spending £100 million on extending its network capacity and the government...
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...Aggregate Demand and Supply Models ECO/372 July 31, 2013 Aggregate Demand and Supply Models Aggregate supply and demand are crucial theories in macroeconomics as they assist economists in deciphering events in the past to help forecast the future. The aggregate supply curve model shows the correlation between the total price level of a country, and the quantity of goods and services manufactured by the suppliers of that country. The aggregate demand curve model shows the quantity of goods and services made locally that consumers, businesses, the government and foreigners are willing to buy during a specific time period. Part I – Analysis and Recommendations: Describe the current state of the following economic factors and analyze how each affects aggregate supply and demand. Develop a set of recommendations for the president regarding government spending and taxes based on the economic factors' current state. Unemployment Unemployment peaked in late 2009 through early 2010 and has come down roughly 2% since then (Bureau Of Labor Statistics, 2013). The unemployment rate for those who are 25yrs and older with at least a bachelor degree lingered at around a high 2% in the early to mid 2000's dropping even to 1.8% in August 2006. After, this the percentage slowly started to to increase and quickly grew around 2008. Just over three years after hitting 1.8%, unemployment for 25yrs and older with at least a bachelor degree grew to 5.1% in November 2009. There...
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...Economic Critique ECO/372 University of Phoenix Economic Critique Aggregate supply and demand are two of the most important elements to consider in all of macroeconomic, regardless of which of the many theories or models one applies. Understanding how various economic factors influence supply and demand is very important particularly vital to the government while determining economic policy. Factors like unemployment, expectations, consumer income, and interest rates all have an affect on the aggregate supply and demand. These factors will be discussed from both the Keynesian and Classical macroeconomic perspective. Current State of Unemployment, Expectations, Consumer Income, and Interest Rates Unemployment The unemployment rate has been steadily dropping over time. As of the summer of 2012 the unemployment rate was at 8-1/4 percent, and fell to a little below 8 percent as of January 2013 (Board of Governors of the Federal Reserve System, 2013). However, this improvement is still well above unemployment rates pre-recession. Also, a larger portion of the unemployed have been so for six months or longer (Board of Governors of the Federal Reserve System, 2013). In more recent months according to "Bureau Of Labor Statistics" (2013), “the unemployment rate edged down to 7.4 percent as of July 2013” (News Release USDL-13-1527 ). Economists try to interpret this information in order to better determine which way government policy should go. According economist, John...
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...Received: | 1 of 1 | | Comments: | | | | 3. | Question : | (TCO 6) The crowding-out effect of expansionary fiscal policy suggests that | | | Student Answer: | | government spending increases at the expense of private investment. | | | | imports replace domestic production. | | | | private investment increases at the expense of government spending. | | | | saving increases at the expense of investment. | | Instructor Explanation: | Chapter 30. | | | | Points Received: | 1 of 1 | | Comments: | | | | 4. | Question : | (TCO 5) The determinants of aggregate supply | | | Student Answer: | | are consumption, investment, government, and net export spending. | | | | explain why real domestic output and the price level are directly related. | | | | explain the three distinct ranges of the aggregate supply curve. | | | | include...
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...Aggregate Demand and Supply Evaluate the extent to which an increase in aggregate demand may affect real output, inflation and unemployment. [25] Real output is an abbreviation for Real Gross Domestic Product or (Real GDP) is a macroeconomics measure of the value of economic output adjusted for price changes, this adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output. Inflation is the increase in general price level over a sustained period of time. Then unemployment is the number if people out of work, which is measure at a point in time, these people out of work are willing and able to hold a job but are unable to find one. Aggregate demand is the total of all demands or expenditures in the economy at any given price. It is created with four factors; Consumption [C], Investment [I], Government Spending [G] and Exports minus imports [X-M]. Creating the formula of: AD = C + I + G + (X-M). Consumption is the total spending by households on goods and services, Investment is the spending by firms on investment goods, Government Spending includes the current spending, for instance on wages and salaries and also includes spending by government, Imports are goods and services which are coming from a foreign, and Exports are good and services going out of a country. Aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is split into Long...
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