CLEP Macroeconomics

CLEP Macroeconomics covers the principles of macroeconomic theory, including national income, inflation, and fiscal policy.

National Income and GDPUnemploymentInflation
Fiscal PolicyMonetary PolicyAggregate Demand and Supply
Understanding Economic IndicatorsApplying Macroeconomic PolicyGlobalization and Macroeconomics
Mastering Key FormulasActive Practice with Real DataUsing Process of Elimination
National Income and ...UnemploymentInflationFiscal PolicyMonetary PolicyAggregate Demand and...Understanding Econom...Applying Macroeconom...Globalization and Ma...Mastering Key Formul...Active Practice with...Using Process of Eli...
Advanced Topics

Aggregate Demand and Supply

The Big Picture: Aggregate Demand and Supply

In macroeconomics, aggregate demand (AD) and aggregate supply (AS) explain the total demand and total supply in an economy at different price levels.

Aggregate Demand (AD)

AD shows the total amount of goods and services people, businesses, and the government want to buy at different prices.

  • Influenced by factors like income, wealth, expectations, and government policy.

Aggregate Supply (AS)

AS is the total output firms in the economy are willing to produce at various price levels.

  • In the short run, AS can be influenced by wages and resource costs.
  • In the long run, AS depends on things like technology and available resources.

Why Is This Important?

The intersection of AD and AS sets the overall price level and determines economic output. Shifts in AD or AS can lead to inflation, unemployment, or economic growth.

Remember

When AD increases faster than AS, prices rise (inflation). When AS increases, economies grow without much inflation.

Examples

  • A government spending boost shifts aggregate demand right, leading to higher output and prices.

  • A new technology increases aggregate supply, lowering prices and increasing economic growth.

In a Nutshell

Aggregate demand and supply show how the economy’s total spending and production interact to set prices and output.

Next
Understanding Economic Indicators