Aggregate demand (AD) curve: A curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government (both inside and outside of the country). -- For getting a customized, super catchy presentation for you on any niche, feel free to contact me: linkedin.com/in/findsadman

1. WELCOME
TO THE
PRESENTATION
Department of Marketing | Islamic University
GROUP 7

2. Course: Macroeconomics
Course Code: MKT-214
1. MD. Hafizur Rahman
COURSE TEACHER: MD. SADIQUL AZAD
This presentation will be given by:
Student ID: B-1925001
2. MD. Imam Hossain
Student ID: L-1925032
3. Shakil Kobir Akash
Student ID: Z-1925023
4. MD. Sagor Raihan
Student ID: S-1925080

3. Chapter- 10​
Aggregate Demand And Aggregate Supply Model
(With Variable Price Level)

4. Learning Objects:
AGGREGATE DEMAND
AGGREGATE SUPPLY
LONG-RUN & SHORT-RUN
AGGREGATE SUPPLY CURVE
MACROECONOMIC EQUILIBRIUM:
AS-AD MODEL

5. AD-AS Model
Keynes in his theory of income and employment assumed that price level
remained constant.
On the other hand, classical economists thought national output or income
was determined by real factors such as capital stock, state of technology,
labour supply and in no way affected by the general price level which was
determined by the quantity of money.

6. AD-AS Model
This classical doctrine is gen erally referred to as classical dichotomy. The
aggregate demand and aggregates supply model, which is generally
referred to as AD-AS model is used to explain fluctuations in output, price
level and rate of inflation in the economy.

7. In Figure 10.1, we measure the output level on
the horizontal axis, and on the vertical axis, we
measure the general price level. As will be seen
from Figure 10.11 aggregate demand curve AD
slopes downward to the right.
The aggregate supply curve shows the quantity
of aggregate output of goods and services that
firms of the economy produce and supply at
each given price level. As is seen from Fig. 10.1,
the aggregate supply curve AS generally slopes
upward to the right.

8. What is Demand?
Demand is the quantity of a commodity that a consumer is willing and able to buy,at each
possible price during a given period of time.
Aggregate Demand:
Aggregate demand is the total desired quantity of goods and services that are bought by
consumers households,private investors,government and foreigners at each possible
price level,other things being held constant

9. Aggregate
Demand Curve:
The aggregate demand curve showing
the relationship between total spending
and price levels slopes graphically
downward to the right.

10. What Is Aggregate Supply?
Aggregate supply, also known as total output, is the total supply of goods
and services produced within an economy at a given overall price in a given
period. It is represented by the aggregate supply curve, which describes the
relationship between price levels and the quantity of output that firms are
willing to provide. Typically, there is a positive relationship between
aggregate supply and the price level.

11. Aggregate Supply Explained
Rising prices are typically an indicator that businesses should expand
production to meet a higher level of aggregate demand. When demand
increases amid constant supply, consumers compete for the goods
available and, therefore, pay higher prices. This dynamic induces firms to
increase output to sell more goods. The resulting supply increase causes
prices to normalize and output to remain elevated.

12. Aggregate Supply Curve
An aggregate supply curve shows the quantity of all the goods and services that
businesses in an economy will sell at a particular price level. In the long run, the
aggregate supply curve is vertical, but the aggregate supply curve will be upward
sloping in the short run.

13. Long-run & Short-run Aggregate
supply curve
Modern macroeconomics draws a distinction between the long-run and
short-run aggregate supply curve. In the long run, the classical
economist who considered the determination of national income and
employment considered the long-run aggregate supply. The long-run
aggregate supply is determined by the three real factors: availability of
labour, the quantity of capital stock and the state of technology. In the
long run price level is variable, and the aggregate supply curve is
vertical.

14. On the other hand, Keynes considered the short-run aggregate supply,
which is perfectly elastic at the fixed price level during the period of
depression. However, in modern or new Keynesian macroeconomics,
Short run aggregate supply curve slopes upward. Further, this short-run
aggregate supply fluctuates over the course of a business cycle, that is,
in different phases of the business cycle. The level of employment
fluctuates around the whole employment level, and GDP fluctuates
around the potential GDP. Note that quantity of real GDP when there is
full employment of labour or, in other words, when unemployment is at
its stock when they are fully employed or used, given that State of
technology.

15. Long-run Aggregate Supply Curve
When the economy achieves its
natural level of employment, as
shown in Panel (a) at the intersection
of the demand and supply curves for
labour, it achieves its potential output,
as shown in Panel (b) by the vertical
long-run aggregate supply curve
LRAS at YP.

16. Short run aggregate supply curve
The economy shown here is in long-run
equilibrium at the intersection of AD1 with
the long-run aggregate supply curve if
aggregate demand increases to AD2. In
the short run, both real GDP and the price
level rise. Suppose aggregate demand
decreases to AD3. In the short run, both
real GDP and the price level fall. A line
drawn through points A, B, and C traces
out the short-run aggregate supply curve
SRAS.

17. Macroeconomic Equilibrium: AS-AD Model
Short-run macroeconomic equilibrium occurs at
the price level at which aggregate output
demanded equals the aggregate supply of
output. That is, short-run equilibrium is reached
at the price level at which the aggregate
demand curve AD intersects the short-run
aggregate supply curve SAS. This is shown in
fig. 10.20, where AD is the aggregate demand
curve and SAS is the aggregate supply curve.
(Short-run Macroeconomic Equilibrium)

18. Long-Run Macroeconomic
Equilibrium Supply
The long-run macroeconomic equilibrium occurs at the price level
where the aggregate demand curve intersects the long-run
aggregate supply curve, which is vertical at the potential GDP level.

19. Thus, long-run equilibrium occurs when real GDP equals potential GDP. But this
long-run equilibrium of price level and real GDP is reached when the money
wage rate adjusts so that the short-run aggregate supply curve shifts to intersect
the long-run aggregate supply curve (LAS) at the point at which the aggregate
demand curve intersects the latter.

20. That's All from Us Today

21. Any Question?

22. Thanks,
Everyone!