This lesson is devoted to the exposition of the aggregate market, which combines the aggregate demand curve and the two aggregate supply curves into two related models used to analyze the macroeconomy. The main focus of this lesson is on how each of the two models, one for the short run and one for the long run, achieve equilibrium. A key conclusion is that the short-run equilibrium does not necessarily correspond to the full-employment production achieved by the long-run equilibrium. This creates recessionary and inflation gaps, which correspond to the macroeconomic problems of unemployment and inflation.

• In the first unit of this lesson we ponder the basics of the aggregate market, including the importance of aggregate demand, aggregate supply, the price level, real production, unemployment, and inflation.
• Moving into the second unit, we review the concept of equilibrium and see how it relates to the aggregate market in both the short run and the long run.
• The third unit analyzes short and long-run equilibrium by combining the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves.
• The topic of self-correction is examined in the fourth unit, especially how automatic shifts of the short-run aggregate supply curve can eliminate recessionary and inflationary gaps.
• The fifth and final unit of this lesson previews the use of the aggregate market to analyze business cycle stabilization policies, with particular emphasis on the time period of adjustment.

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