2 What you will learn in this chapter: How the aggregate supply curve illustrates the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy Why the aggregate supply curve different in the short run compared to the long run How the aggregate demand curve illustrates the relationship between the aggregate price level and the quantity of aggregate output demanded in the economy How the AS–AD model is used to analyze economic fluctuations How monetary policy and fiscal policy can stabilize the economy
14 The Multiplier The size of the multiplier, 1/1 – MPC, depends on the marginal propensity to consume, MPC: the larger the MPC, the larger the change in real GDP for any given autonomous increase in aggregate spending.
23 Macroeconomic Policy Fiscal policy affects aggregate demand directly through government purchases and indirectly through changes in taxes or government transfers that affect consumer spending. Monetary policy affects aggregate demand indirectly through changes in the interest rate that affect consumer and investment spending.
24 The End of Chapter 27 coming attraction: Chapter 28: Income and Expenditure