Aggregate Supply and Demand Curves
Figure 20-6 shows the aggregate supply and desolated schedules for the output of an entire economy. the horizontal, or quantity, axis is the total out factories (real CDP) of the economy. On the axis the overall price level (say, as measured by the summer price index) use the symbol Q for real output and the price level. The downward-sloping curve is the aggregate demand schedule, O( AD curve. It represents “what’ everyone In. the .economy-s-consumers, businesses, foreigners, and governments=-would buy at differ aggregate levels (with other factors affect- aggregate held -constant}, From the curve, we see overall price level of 150, total spending would be $3000 billion (per rear). If the price Revel rises to 200, total spending would fall to $2300 billion.
The upward-sloping curve is the aggregate supply schedule, or AS curve. This curve represents the quantity of goods and services that businesses are willing to.produce and sell at each price level (with other determinants of aggregate supp!)’ held constant). According to the curve, businesses will want to sell $3000 billion at a price level of 150; they will want to sell a higher quantity, $3300 billion, if prices rise to 200. As the level of total output demanded rises, businesses will want to sell more goods and services at a higher price level.
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