Explain How the Static Aggregate Demand and Aggregate Supply Model

question 139

Essay

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level,particularly with respect to decreases in aggregate demand.Describe how the aggregate demand curve is different in the dynamic model as compared to the static model.Describe how potential GDP is different in the dynamic model as compared to the static model.

---

Definitions:

Total Sales Revenues

The total income received by a company from its sales of goods or services, before any expenses are subtracted.

Total Costs

The complete sum of expenses incurred by a company in producing goods or services, including fixed, variable, and semi-variable costs.

Margin Of Safety

The difference between actual or expected sales and the breakeven sales, indicating how much sales can decrease before a company incurs a loss.

Volume Of Sales

The total number of goods or services sold within a specific time frame, measuring the output of a business' activities.