Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
   1. Aggregate demand and supply - introduction
   2. The AD/AS model
   3. Aggregate demand curve
   4. Changes in aggregate demand
   5. Short-run aggregate supply (SRAS)
   6. Changes in SRAS
   7. Long run aggregate supply (LRAS) - classical
   8. Changes in LRAS - classical
   9. Long run aggregate supply (LRAS) - Keynesian
   10. Aggregate supply changes
   11. Full employment level of national income
   12. Equilibrium national income
   13. The essentials of AD and AS
   14. Changes in short-run equilibrium - summary
   15. Equilibrium in the long run?
   16. Equilibrium in the Keynesian model
   17. Inflationary and deflationary gaps
   18. Keynes vs. Hayek (video)
   19. The Keynesian multiplier
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Aggregate demand and supply - introduction

In this section we consider the following topics in detail:

• Aggregate demand
• Aggregate supply
• Equilibrium
• The Keynesian multiplier

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As an economist you want to be able to model what is happening in the macroeconomy.

In particular, what causes change in the economy at the macro level and to develop appropriate policies to achieve macroeconomic goals.

In managing a country's economy, governments aim to achieve:

• low unemployment or full employment
• price stability - low and consistent levels of inflation
• a long term balance in balance of payments current account
  
• Maintain high levels of economic growth
• an equitable distribution of income
  

There will always be trade-offs (achieving one gaol adversly affects another goal) between these macroeconomic goals, it can be difficult (impossible?) to maintain all of them at once; governments will, as a result, need to establish acceptable target ranges.

In trying to understand the various macroeconomic problems a country may face, and the policies that its government may adopt in response, it is useful to look at one of the most common theoretical frameworks for analysing the macroeconomy: aggregate demand and supply.

These are similar to the concepts of demand and supply that you considered in Section 1, but with the addition of the word 'aggregate'. Agregate means 'the sum of' or `overall´, so you are now looking at total demand and supply in the whole economy, instead of demand and supply of goods and services in individual markets.