in this chapter we will explore:
- 6.1 Short run aggregate demand and output
- 6.2 Consumption, saving and investment
- 6.3 Exports and imports
- 6.4 Aggregate expenditure & equilibrium output
- 6.5 The multiplier
- 6.6 Equilibrium output and the AD curve
In Chapter 5 we saw that real output and employment are sometimes smaller, and at other times larger, than potential output YP. According to our aggregate demand and aggregate supply model, short-run changes in AD and AS conditions cause these fluctuations in output. But why do AD and AS conditions fluctuate? To answer this question, we begin with a simple short-run model of the economy.