The document defines the aggregate price level as the general price of all goods and services produced in an economy over time, and explains that economists use price indexes and the aggregate price level to measure inflation and deflation. It also discusses the relationship between aggregate output and the price level, noting that aggregate demand typically has a negative slope, so a lower price level is associated with higher aggregate demand and output. The National Bureau of Economic Research programs aim to more accurately measure inflation and output to improve short-run policy decisions.

1. 1
(The Aggregate Price Level)
16-Dec-2018
University of Zakho
College of administration and Economy
Department of Banking and financial
Economic
Prepared by :
Adar Hussein haji
Barzan Rashid Abde
Heja Jahwer Xorshed
Omed Adnan Kalho
Rawand Jumha Fatah
Somaya Hishyar Abdlsalam
Supervisor :Islam Babela

2. 2
List of content:
 Definition and introduction of ( aggregate price level )
 Price indexes and the aggregate price level
 NBER program(s)
 Realationship between output and the price level

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Definition and introduction of ( The aggregate price level)
The aggregate price level refers to the general or aggregate price of the collective
goods and services produced in an economy over a period of time . the calculation
of this price is determibed by various economic factors , including aspects like the
effects of excessive demand and the effects of excessive supply. Economists rely on
this number as a means of making determinations regarding the macroeconomic
status of the economy of a nation.
A drop in the aggregate price level , also known as a deflation , is normally the result
of toolittle demand by consumers for the finished products in an economy. When the
consumers fail to buy as much product as before , the aggregate price of the product
well drop in response to the sluggishness of the market . in such a situation , a centrl
bank may try to artificially stimulate the market through manipulating the interest
rate . a reduction of the interest rate may encourage the consumers to obtain more
money from banks and to spend more.
Price index and the aggaregate price level
The aggregate price level is a measure of the overall level of prices in the
economy.
•To measure the aggregate price level, economists calculate the cost of purchasing
a market basket.
•A price index is the ratio of the current cost of that market basket to the cost in a
base year, multiplied by 100.

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NBER program (s)
Inaccurate measures of the aggregate price level may distort short-run policy
decisions and may produce misleading comparisons of productivity growth across
decades and among nations. This paper serves a dual purpose of reviewing
compactly the vast American literature on price and output measurement, and of
identifying special aspects of American methods which affect international
comparisons of inflation and output growth. The traditional problem of substitution
bias in the Consumer Price Index (CPI) is of minor importance compared with the
bias introduced by new products, changes in the quality of existing products, and
outlet substitution bias. The quality bias for U.S. consumer durables has recently
been estimated to be roughly 1.5 percent per year for the postwar period, and roughly
3 percent per year for consumer durables, The only available study of outlet
substitution bias estimates a 2 percent annual rate for food in the 1980s. Cross-
country differences in measurement methods tend to overstate the recent
productivity performance of U.S. relative to European manufacturing, with an
understatement for U.S. nonmanufacturing. Both European and U.S. manufacturing
performance are probably understated relative to Japan, which seems to do the best
job of incorporating new products and correcting for quality change of high tech
goods.
Realationship between output and the price level
Assuming no money illusion in the goods and money markets , the equilibrium
condictions in these markets can be expressed by constructing the IS and LM curves
with the rate of interest , and real output ,measured along the axes ,as in the top part
of diagram for the given stance of fiscal and monetary policy (Go,Mo) and any
given price level , the instruction of these two curves determines the equilibrium
quantity of output demonded at the given price and these co-ordinates are plotted as
one point on the aggregate demand relationsip DD in the lower part of diagram .

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With no change in G or M but with a lower price level there will be a higher level
of real balances and the LM curve will be further to the right , leading ander normal
assumption ,to a lower rate of interest and higher level of investment demand . since
a higher level of aggregate demand , is a associated with a lower level of prices , the
demand relationship has a negative slope . if either the IS curve is vertical or the LM
curve horizontal, so that in The absence of the pigou effect and increase and ral
balances fails to raise aggregate demand , the demand relationship will , however ,
by vertical. By definition expansionary policy measures by the authorities may be
expected to increase aggregate demand at any price level , shift the DD schedule to
the right. Thus with the LM curve given by Mo and Po as an diagram an increase in
government spending (with no change the stock of money) sufficient to shift the IS
curve to the right till it intersect the LM curve at the higher interest rate ,will increase
aggregate demand at the same price level, thus the DD curve will shift to the right
as shown by the arrow in diagram . similarly , with the IS curve given by a
government spending at the tate an increase in the supply of money (with no change
in Government spending ) sufficient to displace the LM curve to the right and to
lower the rate of interest to will also increase demand at the same price level . of
course if fiscal policy affects only the rate of interest because the LM curve is vertical
, then there will be no shift in the demand relationship following a change in
government spending . And where the demand relationship is a vertical line (See
above) it will not shift in response to changes in the money supply .

6. 6
The references:
m.wisegeek.com/what-is-aggregate-price-level
https://scf.instructure.com
https://www.nber.org
https://bokks.google.iq (Harry g.johnson) page 188