Purpose of Economics models

The purpose of economic models

Aggregate Demand and Aggregate Supply Graph

A graph used to show general price level, real output, and full employment output in an economy in long-run equilibrium (potential = actual).

Production Possibilities Frontier (PPF)

A graph showing the maximum production possibilities of two goods at full employment, illustrating opportunity cost, inefficiency/recession, and growth.

Loanable Funds Market

A market used to show the real interest rate (RIR) based on the supply and demand for loanable funds.

Money Market Graph

Used in a limited reserve system to show the nominal interest rate or federal funds rate.

Reserve Market Graph

Used in an ample reserve system to show the policy rate (Federal Funds Rate).

Foreign Exchange Market

Used to show the appreciation/depreciation of a currency.

Phillips Curve

Shows the relationship between inflation and unemployment.

Market Graph for a Good/Service

Illustrates supply and demand, and how prices below equilibrium create shortages, while prices above create surpluses.

Demand-Pull Inflation

Inflation resulting from an increase in aggregate demand.

Cost-Push Inflation

Inflation resulting from a decrease in aggregate supply.