MACROECONOMICS

Abd-ur-Rehman
Ahmad Jahanzaib
Hammad Mirza
Sabih Arshad
 Chapter.12

Content
01.Aggregate
Definition
Expenditure/Aggregate Demand

Movement along the curve

Shift in Demand curve

02. Aggregate Supply/Gross Domestic Product

Definition
Movement along the supply curve
Shift in Supply curve
2
Aggregate Demand

Aggregate demand is an economic measurement of the total

amount of demand for all finished goods and services produced
in an economy.

A.D=C+I+G+(X-M)
3
 Determinants of Aggregate Demand

Consumption

Government Spendings

Investments

4
Aggregate Demand Curve
The aggregate demand curve represents the total quantity of all
goods (and services) demanded by the economy at different price
levels. 45
Prices 40
35
30
25
20
15 A.D
10
5
0
10 20 30 40

GDP
5
Movement along the curve:
45

40

35

30

25

20

15

10

0
10 20 30 40
Shift in the demand curve:
45

40

35

30

25

20

15

10

0
10 20 30 40
The variables that shift the demand curve
• Changes in government policies
(Govenment spendings) (Taxes)

• Changes in the expectations of the household

and firms.
(Investments) (Savings)

• Changes in foreign variables

(Exports) (Imports)
 Changes in government policies
80
Govenment spendings(+) Taxes(+)
70 70

70
60 60

60

50 50 50
50

40 40 40
40

30 30
30

20 20
20

10 10

0 0
10 20 30 40 20 30 40 50 60 9
AD1 AD2 AD1 AD2
 Changes in foreign variables
80

70 70
Exports(+) Imports(+)
70

60 60
60

50 50 50
50

40 40 40
40

30 30
30

20 20
20

10
10

0
10 20 30 40 0
20 30 40 50 60
AD1 AD2
AD1 AD2
 Changes in the expectations of the household & firms
80
Investments(+) Savings(+)
70 70
70

60 60
60

50 50 50
50

40 40 40
40

30 30
30

20 20
20

10 10

0 0
10 20 30 40 20 30 40 50 60

AD1 AD2
AD1 AD2
Aggregate Supply

Aggregate supply is the total amount of goods

and services that firms are willing to sell at a
given price in an economy.

Y=C+S+T
Y=C+I+G+(X-M)
 Determinants of Aggregate Supply

Consumption

Taxes
Savings
&
&
Government Expences
Investments
13
 Long-Run Aggregate supply curve
1.2

P3 0.8

0.6

P2
0.4
P1

0.2

GDP 14
Short-Run Aggregate Supply curve
An aggregate supply curve represents all the goods
and services produced in an economy at a particular
price level.
60

50

40

30

20

10

0
10 20 30 40 50
Movement along the curve:

80

70

60

50

40

30

20

10

0
10 20 30 40 50
Yd
Shift in the supply curve:
60

50

40

30

20

10

0
10 20 30 40 50
 The variables that shift the supply curve
Increase in capital and labor stock

Technological Advancements

Expected changes in Price levels

 Capital and Labor stock

Decrease 60
Increase
60

50
50

40
40

30
30

20
20

10 10

0 0
10 20 30 40 50 10 20 30 40 50
Technological Advancement
60

50

40

30

20

10

0
10 20 30 40 50
 Expected changes in Price levels

Decrease Increase
60
60

50
50

40
40

30
30

20
20

10 10

0 0
10 20 30 40 50 10 20 30 40 50