Gdp price level, Microeconomics

GDP Price Level

At the equilibrium level of income aggregate spending in the economy equals aggregate output. All along, we have assumed that the general price level remains unchanged. We need to give up this assumption and establish relationship between real GDP and the general price level.

The general price is determined by the intersection of the aggregate demand curve and the aggregate supply curve.

Aggregate demand curve shows, for each price level, the associated level of GDP for which aggregate desired spending equals total output, and is consistent with the level of income generated at the output.

Aggregate supply curve relates the quantity of output supplied to the price level. Short-run aggregate supply curve (SRAS)shows the quantity of output that firms would like to produce and to sell at each price level on the assumption that the prices of all inputs remain constant. The long-run aggregate supply curve (LRAS) plots the desired quantity of output that firms would like to produce after the price level and input prices have fully adjusted to any demand shock.

Posted Date: 6/11/2013 7:39:28 AM | Location : United States

Related Discussions:- Gdp price level, Assignment Help, Ask Question on Gdp price level, Get Answer, Expert's Help, Gdp price level Discussions

Write discussion on Gdp price level
Your posts are moderated
Related Questions

How we constract the cost structure of firms

explain diagrammatically the bains model of limit pricing.

how measure the inflation

under which market structure does the banking sector fall?

i when should continue to produce in the short run

Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline,S1 represents the supply curve for paperback novels and S2 represents the s

Ask question #what is an indifference curveMinimum 100 words accepted#

Steel and aluminum production Steel Canada 500, France 1200 Aluminum Canada 1500, France 800 The maximum amount of steel or aluminum that Canada and France can produce if they full