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CONTEMPORARY ECONOMICS© Thomson South-Western 11.4 Aggregate Demand and Aggregate Supply SLIDE 3 Aggregate Output Aggregate output is the total amount of all final goods and services produced in the economy during a given period. Aggregate demand is the relationship between the average price of aggregate output and the quantity of aggregate output demanded.
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CONTEMPORARY ECONOMICS © Thomson South-Western
11.4 Aggregate Demand and Aggregate Supply
Explain what is meant by aggregate output and the economy’s price level.
Describe the aggregate demand curve and the aggregate supply curve, and show how they determine the equilibrium level of price and aggregate output.
Objectives
CONTEMPORARY ECONOMICS © Thomson South-Western
11.4 Aggregate Demand and Aggregate Supply
aggregate outputaggregate demandprice levelaggregate demand curveaggregate supply curve
Key Terms
11.4 Aggregate Demand and Aggregate Supply SLIDE3
CONTEMPORARY ECONOMICS © Thomson South-Western
Aggregate OutputAggregate output is the total amount of
all final goods and services produced in the economy during a given period.
Aggregate demand is the relationship between the average price of aggregate output and the quantity of aggregate output demanded.
11.4 Aggregate Demand and Aggregate Supply SLIDE4
CONTEMPORARY ECONOMICS © Thomson South-Western
The Price LevelThe price level is a composite measure
reflecting the prices of all goods and services in the economy relative to prices in a base year.
11.4 Aggregate Demand and Aggregate Supply SLIDE5
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Real Gross Domestic ProductAfter adjusting GDP for price changes,
you end up with real GDP.
11.4 Aggregate Demand and Aggregate Supply SLIDE6
CONTEMPORARY ECONOMICS © Thomson South-Western
Aggregate Demand CurveThe aggregate demand curve shows the
relationship between the price level in the economy and the real GDP demanded.
11.4 Aggregate Demand and Aggregate Supply SLIDE7
CONTEMPORARY ECONOMICS © Thomson South-Western
Aggregate Supply CurveThe aggregate supply curve shows how
much output U.S. producers are willing and able to supply at each price level.
11.4 Aggregate Demand and Aggregate Supply SLIDE8
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EquilibriumThe intersection of the aggregate demand
curve and aggregate supply curve determines the equilibrium levels of price and real GDP in the economy.
11.4 Aggregate Demand and Aggregate Supply SLIDE9
CONTEMPORARY ECONOMICS © Thomson South-Western
Aggregate Demand SupplyThe economy’s real GDP and price level are determined at the intersection of the aggregate demand and aggregate supply curves.
Figure 11.9
11.4 Aggregate Demand and Aggregate Supply SLIDE10
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U.S. Real GDP and Price Level Since 1929
Figure 11.10
