Aggregate Demand Aggregate Supply Aggregate demand and supply

Aggregate Demand Aggregate Supply

Aggregate demand and supply analysis

Aggregate demand aggregate supply Price level AS Pe AD O National output

Aggregate demand aggregate supply Price level AS Pe P 2 b a AD O National output

Aggregate demand supply The New Classical Approach

New classical version of aggregate supply Price level AS O National output

New classical version of aggregate supply Price level AS P 2 P 1 O AD 2 AD 1 Y National output

Aggregate demand supply The Extreme Keynesian Approach

Extreme Keynesian version of aggregate supply Price level AS P O YF National output

Extreme Keynesian version of aggregate supply Price level AS P 4 AD 4 P AD 3 AD 2 O AD 1 Y 2 National output YF

Aggregate demand supply A typical short-run AS curve

A typical short-run aggregate supply curve Price level AS O YP National output

A typical short-run aggregate supply curve Price level AS AD 4 AD 2 AD 1 O Y 1 Y 2 AD 3 Y 3 National output Y 4 YP

Short-run response of a profit-maximising firm to a rise in demand £ MC P 1 AR 1 Q 1 MR 1 Q

Short-run response of a profit-maximising firm to a rise in demand £ MC P 1 AR 2 AR 1 Q 1 MR 2 MR 1 Q

Short-run response of a profit-maximising firm to a rise in demand £ MC P 2 P 1 AR 2 AR 1 Q 2 MR 1 Q

Aggregate demand supply The New Classical approach Effect on the long-run AS curve

The long-run aggregate supply curve when firms are interdependent SRAS 1 Price level (expected price level = P 1) P 1 a AD 1 O Q 1 National output

The long-run aggregate supply curve when firms are interdependent SRAS 2 (expected price level = P 3 ) SRAS 1 Price level (expected price level = P 1) c P 3 P 2 P 1 b a AD 2 AD 1 O Q 1 Q 2 National output

The long-run aggregate supply curve when firms are interdependent LRAS SRAS 2 (expected price level = P 3 ) SRAS 1 Price level (expected price level = P 1) c P 3 P 2 P 1 b a AD 2 AD 1 O Qn Q 2 National output

Aggregate demand supply The Keynesian Approach Effect of investment on the long-run AS curve

Effect of investment on the long-run AS curve Price level AS 1 (short run) a AD 1 National output

Effect of investment on the long-run AS curve Price level AS 1 (short run) AS 2 (short run) b AS (long run) d a AD 2 AD 1 National output