About This Chapter
Aggregate Demand and Supply
Aggregate demand is part of an economic theory developed by British economist John Maynard Keynes. In these lessons, you'll learn about aggregate demand and supply, as well as a few related concepts, including the aggregate demand curve and the marginal propensity to consume (MPC). Discussion of these concepts includes definitions and exploration of elements, like shifts in the aggregate demand curve and the formula used to calculate MPC.
Have you ever heard the terms 'sticky wages' or 'sticky prices'? This chapter also covers these concepts. You'll learn how sticky wages can have an impact that goes beyond worker frustration over being denied a raise. These concepts will be accompanied by an introduction to, and explanation of, the concept of economic equilibrium, which is important in macroeconomics.
Finally, these videos cover favorable and unfavorable supply shocks. You'll learn what a supply shock is, whether it's favorable or unfavorable, and explore examples of the economy experiencing unexpected changes, both good and bad. These lessons also look at changes in the economy over both the long and the short term.
If you need additional resources to help master these economic concepts, check out the self-assessment quizzes that accompany each video. Through these quizzes, you can measure your mastery of aggregate demand and supply. There are also transcripts if you'd like to access the material in a different format.
1. The Keynesian Model and the Classical Model of the Economy
Economists use two basic models to describe economic growth. In this lesson, you'll find out more about each one of these models using real-world examples. So buckle up your seatbelts!
2. Supply and Demand Curves in the Classical Model and Keynesian Model
See how economists illustrate aggregate supply and aggregate demand in the long-term and short-term using the Classical and Keynesian models. This lesson emphasizes the differences in the shape of the aggregate supply curve using these two models.
3. Aggregate Supply and Aggregate Demand (AS-AD) Model
Supply and demand models are useful for examining the behavior of one good or market, but what about looking at a whole economy? Luckily, the aggregate supply and aggregate demand model lets us do just that.
4. Understanding Shifts in Labor Supply and Labor Demand
Find out what the labor supply is and what causes it to change or shift. Learn about labor demand and what causes firms and markets to increase or decrease their demand for labor.
5. Marginal Propensity to Consume: Definition and Formula of the MPC
MPC or MPS, what category is higher when you have extra money? In this lesson, learn about the marginal propensity to consume, one of the most important assumptions underlying fiscal and monetary policy.
6. Government Spending, GDP, and Crowding Out Private Investment
When the government spends more than it earns, it has to borrow money, which has repercussions throughout the economy. In this lesson, learn how government spending can crowd out private investment in the market for loanable funds.
7. Aggregate Supply in the Economy: Definition and Determinants
Learn about one of the fundamental components of economics. Find out what aggregate supply is and seven of the most common areas that influence it in today's economy.
8. Aggregate Supply in the Short Run
Learn about aggregate supply in the short run (SRAS) and what that really means. Find out how the overall price of goods affects quantity supplied in the short run and other key determinants that can increase and decrease aggregate supply in this time period.
9. Sticky Wages and Prices: Effect on Equilibrium
With the help of real-world examples, this lesson explains Keynes' important observation that wages and prices often don't adjust quickly to changes in economic conditions
10. Favorable Supply Shocks & Unfavorable Supply Shocks
In this lesson you'll learn the definitions, causes and effects of the two types of supply shocks in the economy by looking at a fictitious economy as an example.
11. Impact of Marginal Propensity to Consume on Individual & National Economy
In this lesson, we will learn about marginal propensity to consume. We will learn what it is and how it affects both individuals as well as the economy. When the lesson concludes, you will be able to test your knowledge with a quiz.
12. Marginal Propensity to Save: Formula & Relationship to MPC
In this lesson we will learn what happens when we receive extra income. Specifically, we will look at marginal propensity to save and the formula used to calculate it. The lesson will end with a summary and a quiz to test your knowledge.
13. Consumption Function: Relationship Between Marginal & Average Propensity to Consume
The United States economy is primarily driven by consumption. In this lesson, you'll learn about consumption, marginal propensity to consume, and average propensity to consume. A short quiz follows.
14. Marginal Propensity to Consume & Multiplier Effect
Can you remember the last time you splurged and bought something you have always wanted? While that probably had an enjoyable effect on you, what were the effects of your spending on the economy? In this lesson, we will answer that question as we explore marginal propensity to consume.
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Other chapters within the Economics 102: Macroeconomics course
- Scarcity, Choice, and the Production Possibilities Curve
- Comparative Advantage, Specialization and Exchange
- Demand, Supply and Market Equilibrium
- Measuring the Economy
- Inflation Measurement and Adjustment
- Understanding Unemployment
- Macroeconomic Equilibrium
- Inflation and Unemployment
- Economic Growth and Productivity
- Money, Banking and Financial Markets
- Central Bank and the Money Supply
- Fiscal and Monetary Policies
- Foreign Exchange and the Balance of Payments
- Inflows, Outflows, and Restrictions
- Studying for Economics 102