Learning Objectives By the end of this section, you will be able to: The Keynesian perspective focuses on aggregate demand. The idea is simple: firms produce output only if they expect it to sell. Thus, while the availability of the…
Figure 12.1 Signs of a Recession Home foreclosures were just one of the many signs and symptoms of the recent Great Recession. During that time, many businesses closed and many people lost their jobs. (Credit: modification of “Foreclosure” by Taber Andrew Bain/Flickr Creative…
11.1 Macroeconomic Perspectives on Demand and Supply Neoclassical economists emphasize Say’s law, which holds that supply creates its own demand. Keynesian economists emphasize Keynes’ law, which holds that demand creates its own supply. Many mainstream economists take a Keynesian perspective, emphasizing…
Learning Objectives By the end of this section, you will be able to: We can use the AD/AS model to illustrate both Say’s law that supply creates its own demand and Keynes’ law that demand creates its own supply. Consider the SRAS curve’s three…
Learning Objectives By the end of this section, you will be able to: The AD/AS model can convey a number of interlocking relationships between the three macroeconomic goals of growth, unemployment, and low inflation. Moreover, the AD/AS framework is flexible enough to…
Learning Objectives By the end of this section, you will be able to: As we mentioned previously, the components of aggregate demand are consumption spending (C), investment spending (I), government spending (G), and spending on exports (X) minus imports (M).…
Learning Objectives By the end of this section, you will be able to: The original equilibrium in the AD/AS diagram will shift to a new equilibrium if the AS or AD curve shifts. When the aggregate supply curve shifts to…
Learning Objectives By the end of this section, you will be able to: To build a useful macroeconomic model, we need a model that shows what determines total supply or total demand for the economy, and how total demand and…
Learning Objectives By the end of this section, you will be able to: Macroeconomists over the last two centuries have often divided into two groups: those who argue that supply is the most important determinant of the size of the…
Figure 11.1 New Home Construction At the peak of the housing bubble, many people across the country were able to secure the loans necessary to build new houses. (Credit: modification of “our house! Again!” by Tim Pierce/Flickr Creative Commons, CC BY 2.0) Chapter…