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AD-AS ANALYSIS: An economic model relating the price level and real production that is used to analyze business cycles, gross domestic product, unemployment, inflation, stabilization policies, and related macroeconomic phenomena. The AS-AD model, inspired by the standard market model, captures the interaction between aggregate demand (the buyers) and short-run and long-run aggregate supply (the sellers).
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Lesson 10: Gross Domestic Product | Unit 3: Two Views of GDP
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Page: 17 of 25
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In this unit, you should have learned something about:- GDP can be measured in two different ways, from the demand or expenditure side and from the supply or resource side of the economy.
- From the expenditure side, the four sectors of the economy buy ALL current economic production and when aggregated give us GDP. This is summarized by the formula: GDP = C + I + G + (X-M).
- The calculation of GDP from the resource side of the economy is based on the fact that the revenue received for the sale of GDP is paid to or claimed by a factor of production.
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ASSUMPTIONS, PRODUCTION POSSIBILITIES The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.
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In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
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"Every generation of Americans needs to know that freedom exists not in doing what we like, but in having the right to do what we ought. " -- Pope John Paul II
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WACM
Weak Axiom of Cost Minimization
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