In Chapters 11, 12, and 13, we discussed the three most widely used measures of macroeconomic performance: GDP, unemployment, and the price level. However, these are just measures of the macroeconomy, the outcomes of how an economy works, rather than a model to tell us how it works. In this chapter, we turn our attention to the model of aggregate supply and aggregate demand, which helps us understand how the price level is determined and the fluctuations that we tend to see in unemployment and GDP.
After completing this chapter, the student should be able to:
1. Describe the business cycle.
2. Describe aggregate demand and aggregate supply.
3. Use the aggregate demand ...