2.2 Aggregate demand and aggregate supply analysis

changes in price level are represented by

movements along AD and AS

factors that shift AD

any change in one of the components of AD

consumption, investment, govt spending, taxation, trade

factors that shift AS

availability of factors of production

productivity of factors of production

costs of factors of production

technological improvements

factors which shift LRAS

technological change

changes in relative productivity

changes in education and skill

changes in government regulations

factos which impact SRAS

price of raw matireals

costs of labout

levels of taxation and subsidies

assupmtion of SRAS

capital is a fixed FoP

example of a demand side shock

covid 19 → 10% decline in consumption

example of a supply side shock

gas prices surged → lower supply from russia and a cold winter in Europe