This Question Considers How an Economy Changes Over Time and How

question 103

Essay

This question considers how an economy changes over time and how the aggregate demand and supply model treats the time dimension of an economy.
a) How do the aggregate-demand and aggregate-supply curves shift over time?
b) Related to point a, identify and discuss the limitations to the simple, "static" aggregate-demand and aggregate-supply model. What are the consequences of predicting phenomena that have a time dimension (remember the 'short-run' and 'long-run' distinction) using an essentially static model?
c) How could the static model be changed to better incorporate the time dimension of the economic variables it tries to explain?

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