ECONOMICS, 5e

Roger Arnold

CHAPTER 7
Aggregate Demand and
Aggregate Supply
Exhibit 1 The Aggregate Demand Curve

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 2a Why the Aggregate Demand Curve Is
Downward Sloping

Price level fallspurchasing power

risesmonetary wealth risesbuy
more goods.

Real Balance
Effect

Price level risespurchasing power

fallsmonetary wealth fallsbuy
fewer goods.

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

©2001 South-Western College Publishing 3
Exhibit 2b Why the Aggregate Demand Curve Is
Downward Sloping

Price level fallspurchasing power

risesless money needed to buy
fixed bundle of goodssave
moresupply of credit risesinterest
rate fallsbusinesses and
households borrow more at lower
interest ratebuy more goods.
Interest Rate
Effect Price level risespurchasing power
fallsborrow money in order to
continue to buy fixed bundle of
goodsdemand for credit
risesinterest rate risesbusinesses
and households borrow less at higher
interest ratebuy fewer goods.

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

©2001 South-Western College Publishing 4
Exhibit 2c Why the Aggregate Demand Curve Is
Downward Sloping

Price level in U.S. falls relative to

foreign price levelsU.S. goods
relatively less expensive than
foreign goodsboth American and
foreigners buy more U.S. goods.

International
Trade Effect
Price level in U.S. rises relative to
foreign price levelsU.S. goods
relatively more expensive than
foreign goodsboth Americans
and foreigners buy fewer U.S.
goods.

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 3 A Change in the Quantity Demanded of Real GDP
versus a Change in Aggregate Demand

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 4 Changes in Aggregate Demand

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 5 Factors That Change Aggregate Demand

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 6 The Short-Run Aggregate Supply Curve

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 7 Wage Rates and a Shift in the Short-Run
Aggregate Supply Curve

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 8 Changes in Short-Run Aggregate Supply

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 9 Short-Run Equilibrium

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 10 Changes in Short-Run Equilibrium in the Economy

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 11
How a Factor Affects the
Price Level, Real GDP,
and the Unemployment
Rate in the Short-Run

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 12 A Summary Exhibit of AD and SRAS

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 13 Long-Run Aggregate Supply (LRAS) Curve

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 14 Equilibrium States of the Economy

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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Exhibit 15 Different States of the Economy

Arnold Economics, 5e / Ch. 7 Aggregate Demand and Aggregate Supply

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