Learning objectives
Define aggregate demand as AD = C + I + G + (X − M), explain each component and why the AD curve slopes downwards
Analyse the causes of shifts in AD, and distinguish a shift of the AD or AS curve from a movement along it
Define aggregate supply and explain the shape of SRAS and of LRAS, drawn either as a vertical line or in three sections (highly elastic, upward sloping, vertical)
Analyse the causes of shifts in SRAS and LRAS, such as wage rates, raw material prices, productivity and the quantity and quality of factors of production
Use the AD/AS model to find equilibrium and analyse how shifts in AD or AS change real output, the price level and employment
(A Level) Explain how the multiplier magnifies a change in aggregate demand and calculate it as 1 ÷ (1 − MPC)
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