2. 1.Monetor
output
y policy
2.Fiscal Aggrega
policy te
demand Interactio Employme
3.Other nt and
n of
forces unemploy
aggregate
demand ment
1.Price level and
supply Prices&infl
and costs Aggre ation
2.Potential gate
output supply
3.capital,lab
or,technolog Foreign
trade
y

3.  Aggregate supply refers to the total quantity of
goods and services that the nations business
willing to produce and sell in a given period.
 Aggregate supply depends upon the price level
,the productive capacity of the economy and
level of costs.

4.  It refers to the total amount that different
sectors in the economy willing to spend in a
given period .
 Aggregate demand is the sum of spending by
consumers ,business, and governments, and it
depends on the level of prices ,as well as on the
monetary policy, fiscal policy, and other
factors,

5.  The downward sloping curve is the aggregate
demand schedule, or AD curve.
 It represents what everyone in the economy-
consumes, business, foreigners and
governments-would buy at different price
levels.
 AD curve represents the quantity of total
spending at different price levels, with other
factors held constant.

6.  The upward sloping curve is the aggregate
supply schedule or AS curve.
 This curve represents the quanity of goods and
services that buisness are willing to produce
and sell at each price level.

7.  Macro economic equilibrium is a combination
of overall price and quantity at which all
buyers and sellers are satisfied with their
purchases, sales and prices.

8.  Once the equilibrium is reached neither the
buyers nor sellers wish to change their quanties
demanded r supplied ,and there is no price
level change.