Chapter 13, Problem 14AA

To determine

To state: The reasons for the slopes of aggregate demand and supply curves.

Explanation of Solution

The aggregate demand curve shows the relationship of the real domestic output with the price level. The curve shows an inverse relationship. As with the decrease in price level of goods in an economy, more is the quantity of output, the slope goes downward. The movement of the curve depicts the change in the quantity demanded.

The aggregate supply curve shows the relationship of the aggregate quantity supplied with the price level. The curve shows a positive relationship. As with the increase in price level of goods in an economy, more is the quantity of goods supplied, the slope goes upward. The movement of the curve depicts the change in the quantity supplied.

Economics Concept Introduction

Introduction:

Aggregate demand- The aggregate demand is the total of all planned expenditures that are made in an economy. As the prices of products vary from one another, this cannot be related to individual prices rather it is related to the price level.

Aggregate supply- The aggregate supply is the total output that can be made by the producers on the basis of rise and fall of the price level.