forum response to this 2 post

post 1

1. Aggregate supply and aggregate demand are the total supply and total demand in an economy at a particular period of time and a particular price threshold. Aggregate supply is an economy's gross domestic product (GDP), the total amount a nation produces and sells. Aggregate demand is the total amount spent on domestic goods and services in an economy. Aggregate supply and aggregate demand convey how much firms are willing to produce and how much consumers are willing to demand at a specific price point. Aggregate supply and demand are represented separately by their own curves. Aggregate supply is a response to increasing prices that drive firms to utilize more inputs to produce more output. The incentive is that if the price of inputs remains the same and the price of outputs increases, the firm will generate larger profits and margins by producing and selling more. The aggregate supply curve is represented by a curve that slopes upward, which indicates that as the price per unit goes up, a firm will supply more. The supply curve eventually becomes vertical, indicating that at a certain price point a firm cannot produce anymore, as they are limited by certain inputs, e.g. number of employees and number of factories.
2. Shifts occur when one of the supply elements moves or changes but the price remains constant.
3. The aggregate expenditure model focuses on the relationship between production and planned spending, and is used to measure and evaluate a country's total output. This term focuses on maintaining economic equilibrium, and calculates the sum of all economic activities as well as GDP to determine how a country's economy is performing.

post 2

1. Both aggregate supply and aggregate demand are macroeconomic variables and are therefore used to provide information on the economic state of society. The Aggregate supply is the goods and services produced and sold by businesses, i.e., real GDP. Aggregate demand is the amount of an economy's total spending on goods and services produced.
2. As the price level of goods and services increases, aggregate supply increases, and aggregate demand decreases until the equilibrium point is reached. Aggregate demand will change whenever there is a change in its 4 components: Consumption, investment, government spending, and net exports.
3. GDP can be measured in three ways. One of them is one is the expenditure method, which consists of the sum of the different types of spending on final goods and services. The sum of the four components is the aggregate expenditure, which is equal to income or GDP according to the economy's circular flow.

Aggregate expenditure model: AE = C + I + G + NX

a. Consumption expenditure (C)

b. Investment spending (I)

c. Government spending (G)

d. Exports net of imports (NX)