Abstract: This chapter highlights the aggregate supply and the economy. Aggregate supply describes the production side of the economy. Many things affect aggregate supply including investment and capacity, technology, productivity, expectations, and government policies. The shape of the aggregate supply curve depends on the condition of the economy. Aggregate demand and aggregate supply determine the equilibrium price level and real gross national product (RGNP). The inventories are a leading indicator of RGNP. Unintended inventory reductions foretell rising RGNP. Unexpected inventory accumulations are linked with future RGNP decline. Cyclical unemployment is caused by falling aggregate demand or falling aggregate supply. Unemployment caused by falling aggregate demand is worse when prices are sticky. Demand policies, wage and price controls, indexation, and supply-side policies have all been proposed as inflation cures. Each policy has pros and cons; both economic and political factors have to be considered. Rising aggregate demand increases RGNP in a depression but does nothing but boost the price level at full capacity.
Publication Year: 1984
Publication Date: 1984-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot