Aggregate demand curve ( AD ): It shows how the price and the quantity demanded are related to each other. The curve is negatively-slopped which means that when price rises the quantity demanded falls. Aggregate supply curve ( AS ): It shows how the price and the quantity supplied are related to each other. The curve is positively-slopped which means that when price rises, the quantity supplied also rises. The curve depends on the duration of time. Short-run aggregate supply ( SRAS ): It is a positively =-sloped curve in which supply increases when the price rises. The reason for the upward sloping is that the wages are sticky in the short-run due to formal or informal contracts. At higher aggregate prices, there is higher profit leading to high level of output. Long-run aggregate supply ( LRAS ): It is a vertical curve which means it is independent of price. When price increases there is no change in the quantity supplied. In the long-run, the nominal wages are not fixed, rather it can be negotiated. Consumer confidence index (CCI): It is an index which indicates the confidence of consumers to spend in the upcoming future. It is measured to know the economy status in the near future.

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Chapter 12, Problem 9P

To determine

Concept introduction:

Aggregate demand curve ( AD ): It shows how the price and the quantity demanded are related to each other. The curve is negatively-slopped which means that when price rises the quantity demanded falls.

Aggregate supply curve ( AS ): It shows how the price and the quantity supplied are related to each other. The curve is positively-slopped which means that when price rises, the quantity supplied also rises. The curve depends on the duration of time.

Short-run aggregate supply ( SRAS ): It is a positively =-sloped curve in which supply increases when the price rises. The reason for the upward sloping is that the wages are sticky in the short-run due to formal or informal contracts. At higher aggregate prices, there is higher profit leading to high level of output.

Long-run aggregate supply ( LRAS ): It is a vertical curve which means it is independent of price. When price increases there is no change in the quantity supplied. In the long-run, the nominal wages are not fixed, rather it can be negotiated.

Consumer confidence index (CCI): It is an index which indicates the confidence of consumers to spend in the upcoming future. It is measured to know the economy status in the near future.

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