It is important to distinguish between changes that are anticipated and unanticipated because the impact on the economy will differ between the two. The economy is in long-run equilibrium when the short-run aggregate supply curve, aggregate demand curve, and long-run aggregate supply curve are in equilibrium. What are the major factors causing a shift in aggregate demand (inward or outward)? What are the major factors that will affect short-run aggregate supply? Long-run aggregate supply? Review what factors will lead to a shift in the AD, SAS, and LRAS. An increase in output due to economic growth will increase both short-run and long-run aggregate supply. Unanticipated changes in either aggregate demand or aggregate supply will disrupt long-run equilibrium and cause current output to differ from the economy's long-run potential. Determinants are things (other than price) that shift demand curves, to the left or to the right. Are the determinants of aggregate demand the same things that apply to demand for an individual good?
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Aggregate demand is defined as the total demand for all the final goods and services produced in an economy at a given period of time at all possible price levels. The components of aggregate demand are the same as the components of gross domestic product because both represent the final value of the goods and services produced in an economy during a given period of time, the components are: consumption expenditure, investment expenditure, government spending, and net exports (exports minus imports). The aggregate demand curve is plotted to show the relationship between output and price level, where output is plotted on x-axis and price level is plotted on the y-axis.
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