Core-021 Aggregate Demand and Supply
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About Core-021 Aggregate Demand and Supply
About the Teacher
Jay Moulton
Jay Moulton is a business veteran. In short:
- Corporate finance and turnaround expert in U.S. and Canada
- CEO or operator of numerous companies in many industries
- 30 years of actually applying business economics principles
- Successfully led and invested in several leveraged buyouts
- Director or advisor to 30+ different companies
- Experience in both for-profit and not-for-profit sectors
- Producer of 700 professional videos and several TV shows
- Author of six economics and business strategy books
- Graduate of Harvard Business School MBA program
- Graduate of The Royal Military College of Canada
- Professional electrical engineer
- Governor of the Harvard Club of British Columbia
Aggregate Demand and Supply
MODULE 1
Economists measure price levels using the Consumer Price Index and the GDP Deflator. In a recession, aggregate demand declines, cyclical unemployment rises, and wages and prices decline. In this situation, real GDP is lower than the potential GDP which exists at full employment.
Inflationary Gap without Government Intervention
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Learning objectives for this chapter - How Income Flows
The video describes how an inflationary gap is created. Increasing aggregate demand causes tighter labor markets. Workers then demand higher wages and salaries that are reflected in an aggregate supply curve that shifts left until a new equilibrium point is reached at higher wage levels.
When economic conditions are strong, aggregate demand is increasing and the economy is growing rapidly. An inflationary gap exists since actual GDP is greater than full-employment GDP.
Interest Rates vs Bond Prices
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In this lesson, you will learn to: Describe the concept of opportunity costs using the examples of guns and butter.
The Liquidity Preference Theory of John Maynard Keynes says that demand for liquidity is determined by three motives: the transactions motive, the precautionary motive, and the speculative motive.
In famous economist John Maynard Keynes' Liquidity Preference Theory, three motives for holding money are outlined.
When there are low interest rates, the opportunity cost of holding money is low, since opportunity cost is considered to be equal to the current interest rate. There is no compelling reason for people to invest money in bonds.
Interest rates and bond prices are determined by the supply and demand of money.
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