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Aggregate supply - is a schedule, graphically represented by a curve, indicating the level of real natn'l output which will be available at each possible price level.
High price levels create an increasereaseentive for enterprises to produce additional output and offer it for sale. Lower price levels cause reductions in output. As a result the relationship between the price level & the amount national output businesses offer for sale is direct or positive.
The AS curve shows the level of real national output which will be produced at variuos price levels. It comprises three ranges: a horizontal (or Keynesian) range wherein the price level remains constant as Ntn'l output varies; a vertical (or Classical) wherein the Ntn'l output is constant at the full-employment level and the price level can vary; and intermediate range wherein both: real output and the price level are variable.
This paragraph summary.
1. It is useful for purposes of analysys to consolidate - or aggregate - the outcomes from the enormous number of individual product markets into a composite market in which the key variables are the price level and the level of Real National Output. This is acomplished thru an AD-AS model of the economy
2. The AD curve shows the level of Real National Output which the economy will purchase at each possible price level
3. The rationale for the downsloping AD curve is based upon the Interest-Rate effect, the Wealth (or the Real Balances effect) and the Foreign purchases effect. The Interest-Rate effect indicates that, given supply of money, a high price level will increaserease the demend for money, thereby increasereaseing the interest rate and reducing those consumption and investment purchases which are interest rate sevsetive. The Wealth effect indicates that inflation will reduce the real value of purchasing power of fixed-value financial assets held by households and will thereby cause them to retranch on their consumer spending. The FPE suggest that a change in the US' price level relative to other countries will change the NE componemt of the US AD in the opposite direction.,
4. The major non-price-level determinants of AD are spending by domestic consumers, businesses, government & foreign buyers.
5. The AS curve shows the level of Real National Output which the will be produced at each various possible price levels.
6. The shape of the AS curve depends upon what happends to per unit production costs - and threfore to the prices which businesses must receive to cover costs and make a rpofit - as Real National Output expends. The Keynaisian range of the curve is horizontal because, with subtantial unemployment production can be increasereased without per unit costs or price increasereases. In the intermediate range, per unit costs increaserease as production bottlenecks appear and less efficient equipment and workers are employed. Prices must therefore rise as Real National Output is expended in this range. The Classical range coinsides with full employment; Real National Output is at a maximum and cannot be increasereasereased but the price level will rise in response to an increaserease in AD.
7. the major non-price-level determinants of AS are input prices, productivity and the legal-institution environment. All else being equal a change in one of these factors will change per unit production costs at each level of output and threfore alter the location of the AS curve.
8. The intersection of the AD and AS curves determines equilibrium price level and Real National Output.
9. Given AS rightward shifts of AD will:
a) Increase Real National Output and employment but not alter the price level in the Keyneisian range;
b) Increase both Real National Output and the price level in the intermediate range;
c) Increase the price level but not change Real National Output in the Classical range.
10. The ratchet effect is based upon the nototion that prices are flexible upward but, relatively inflexible downward. Hence, an increaserease in AD will raise the price level, but in the short term prices cannot be expected to fall when demand decrease.
11. The basic aggregate demand and supply model is a springboard for a more detailed and comprehensive study of Macroeconomic analysys and issues.
Macroeconomic instability: unemployment & inflation
Unemployment
"Full unemployment is an elusive concept to define. A person might initially interpret it to mean that evryone who is in the labor market - 100% of the labor force - is employed. But such isn't the case some unemployment is regarded as normal or warranted.
Реферат опубликован: 12/11/2009