MACRO ECONOMICS

Macro Economics



Macro Economics

A:

The short-run aggregate market presented in the graph to the right sets the stage for analyzing the effect of a decrease in aggregate demand resulting from a change in any aggregate demand determinant. The vertical axis measures the price level (GDP price deflator) and the horizontal axis measures real chicken and potatoes (real GDP).

The negatively-sloped curve, labeled AD, is the aggregate demand curve and the positively-sloped curve, labeled SRAS, is the short-run aggregate supply curve (Udis Maskus 2001). The current short-run equilibrium, found at the intersection of the AD and SRAS curves, is a price level ...