Question

Search YouTube for at least one video related to either Aggregate Demand or Aggregate Supply. Offer a summary of at least 200 words of what you learned from the video, and make sure to share the link to the video.

Answer 1

Reference: "An Introduction to Aggregate supply by Jason Welker dated Nov 6, 2011"

A summary:

“Aggregate supply is the level of output and income of a nation at a particular price at a particular point in time.”

The Y-axis will represent the Price level and X-axis will represent the GDP or the gross domestic product. The aggregate demand curve is made based on the PL price level and GDP as a downward sloping line.

Short Run or fixed Wage period: In the short run the wages are fixed and it is also known as the period of time in which the level of wage is fixed.

The equilibrium level is determined by the intersection of the aggregate demand and the aggregate supply.

Pe –Equilibrium of price level and Ye-Equilibrium of nation’s income level.

Fall in investment will lead to change in demand or fall in demand. The fall in demand will result in a change in income level since wages are fixed, the employees will be reduced, and unemployment level will increase. The wages cannot be reduced because of minimum wage level defined by the laws. The unions also ensure that wages are not reduced.

In the long run, a year or plus the wages will be adjusted according to changes in demand in the economy. The unemployment levels will again reduce and the supply will increase as the demand will increase again. The wages will begin to fall and employment will again begin to increase in the long run also known as the flexible period. Slowly wage will fall and the output will come back to the original level of output as the demand increase and wages fall. The pressure of demand, supply, and flexibility in wages will return output and supply to its original levels.

The Long-run supply curve is vertical as in the long run with fall in wages and reduction in costs the supply will increase and employment will continue to increase to meet the new requirements but in short run, the changes or fall in demand will lead to increase in employment levels.

As demand increases and supply of labor which is now scare will drive the wages upwards and prices will increase and inflation will increase. The workers will demand higher wages. The cost increase will reduce supply and output will be reduced. In the long run, the output will return to its original demand and supply vertical line.

To sum it up aggregate demand and supply is determined by the cost of labor and the price determined accordingly.

"Reference: "An Introduction to Aggregate supply by Jason Welker dated Nov 6, 2011"