30.4 The AD Curve and Equilibrium Expenditure
MyEconLab Concept Video
In this chapter, we’ve studied the aggregate expenditure model, in which firms change production when sales and inventories change but they don’t change their prices. The aggregate expenditure model determines equilibrium expenditure and real GDP at a given price level. In Chapter 29, we studied the simultaneous determination of real GDP and the price level using the AS-AD model. The aggregate demand curve and equilibrium expenditure are related, and this section shows you how.
Deriving the AD Curve from Equilibrium Expenditure
The AE curve is the relationship between aggregate planned expenditure and real GDP when all other influences on expenditure plans remain the same. ...
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