ECONOMICS, 5e Aggregate Demand and Aggregate Supply Roger Arnold CHAPTER 7 Aggregate Demand and Aggregate Supply

Exhibit 1 The Aggregate Demand Curve Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 2a Why the Aggregate Demand Curve Is Downward Sloping Price level falls®purchasing power rises®monetary wealth rises®buy more goods. Real Balance Effect Price level rises®purchasing power falls®monetary wealth falls®buy fewer goods. Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 2b Why the Aggregate Demand Curve Is Downward Sloping Price level falls®purchasing power rises®less money needed to buy fixed bundle of goods®save more®supply of credit rises®interest rate falls®businesses and households borrow more at lower interest rate®buy more goods. Price level rises®purchasing power falls®borrow money in order to continue to buy fixed bundle of goods®demand for credit rises®interest rate rises®businesses and households borrow less at higher interest rate®buy fewer goods. Interest Rate Effect Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 2c Why the Aggregate Demand Curve Is Downward Sloping Price level in U.S. falls relative to foreign price levels®U.S. goods relatively less expensive than foreign goods®both American and foreigners buy more U.S. goods. Price level in U.S. rises relative to foreign price levels®U.S. goods relatively more expensive than foreign goods®both Americans and foreigners buy fewer U.S. goods. International Trade Effect Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 3 A Change in the Quantity Demanded of Real GDP versus a Change in Aggregate Demand Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 4 Changes in Aggregate Demand Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 5 Factors That Change Aggregate Demand Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 6 The Short-Run Aggregate Supply Curve Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 7 Wage Rates and a Shift in the Short-Run Aggregate Supply Curve Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 8 Changes in Short-Run Aggregate Supply Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 9 Short-Run Equilibrium Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 10 Changes in Short-Run Equilibrium in the Economy Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 11 How a Factor Affects the Price Level, Real GDP, and the Unemployment Rate in the Short-Run Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 12 A Summary Exhibit of AD and SRAS Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 13 Long-Run Aggregate Supply (LRAS) Curve Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 14 Equilibrium States of the Economy Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing

Exhibit 15 Different States of the Economy Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply ©2001 South-Western College Publishing