Influences on the Gross Domestic Product (GDP)
Defining Aggregate Supply and Aggregate DemandYou already know about supply and demand and how these two forces interact in the market. The only difference here is the addition of aggregate, which means "total amount." Aggregate supply and aggregate demand are on a nationwide scale or large scale total national amount. Aggregate supply is the total amount of goods and services in the economy available at all possible price levels. Aggregate demand is the amount of goods and services in the economy that will be purchased at all possible price levels.
Directions: Take a look at the following information regarding the effects of aggregate demand.
Then answer the following questions and post your answers.
Downloaded 5/11/15 from: http://www.econport.org/content/handbook/ADandS/AD/Effects.html
1.) An international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply? choose the best answer below
a. Will the aggregate supply decrease, raising the price level and lower real GDP.
b. Will the aggregate demand decrease lowering both real GDP and the price level.
2.) Describe how the wealth factor influences aggregate demand?