Unit 3: Unemployment and Inflation

In this unit we explore the forces affecting growth, inflation, and unemployment at the aggregate level, such as output, income, or the set of components within GDP.

Aggregate demand is the total amount of goods and services people want to purchase. It measures what people want to buy, rather than what is actually produced. The aggregate demand is the sum of consumption, investment, government expenses, and net exports.

Aggregate supply is the total output an economy produces at a given price level. As we studied in microeconomics, firms achieve equilibrium when they produce the quantity of goods and services consumers want to buy: at a macro level, equilibrium is the point where aggregate supply equals aggregate demand. In this unit we examine shifts in aggregate supply and aggregate demand, and the short-term and long-term effects for the entire economy.