Macroeconomics Study Guides

Aggregate Demand Shifters

These cause shifts in aggregate demand:

1. $C$(consumer wealth, consumer expectations, household indebtedness, taxes)
2. $I$ (interest rates, expected returns on investment, business taxes, technology, degree of excess capacity)
3. $G$
4. $X_n$ (National income abroad, exchange rates)

Aggregate Supply Shifters

These cause shifts in aggregate supply:

1. Input Prices (domestic resource availability [land, labor, capital, entrepreneurial ability], prices of imported resources, market power)
2. Productivity
3. Legal - institutional environment (business taxes and subsidies, government regulation)

AS Curve ranges

Horizontal range - includes only real levels of output which are substantially less than full-employment output. A change in real output in this range won't affect price level at all.

Vertical range - economy has already reached its full-capacity real output. Any increase in the price level at this range won't affect real output at all.

Intermediate range - an expansion of real output is accompanied by a rising price level. The full-employment output is found in this range.