Aggregate Demand and Supply Models Essay

2477 Words Apr 20th, 2015 10 Pages
Aggregate Demand and Supply Models
Team B
ECO/372
March 26, 2015

Aggregate Demand and Supply Models
Many factors within a nation’s economy have the ability to effect one-said nation’s aggregate supply and aggregate demand models. Of these factors, four will be explored through the course of this specific critique and it should be noted, that the specific nation to be observed is the United States of America. The specific factors to be observed in the United States’ economy are their unemployment, their expectations, consumer income, and interest rates. In addition to identifying these four factors and their economic effects, there will be identified what fiscal policies have been put in place by the United States government in order
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The effects that an economy feels in regards to unemployment as it relates to aggregate supply and demand is quite simple to understand, but relies on the understanding of what is causing a firm or business to “cutback” on cost(Washington University in St. Louis, n.d.). More specifically, is it a lack of product demand that is causing a cutback as it relates to cost?
In the case of the United States, I believe a lack of demand for products are the cause for higher unemployment. Because of the elevated rate of unemployment, and a decrease in disposable income for American families, in the United States, there is less demand for products that are not necessary for survival. Amenities such as the top of the line flat screen television are looked upon as less important because those who are unemployed must keep whatever funds they have access to for more important items such as food or shelter. What is interesting about this effect of unemployment though is that when Americans do not spend money on those products that are not absolutely necessary for survival, there is the potential for more unemployed as the company’s manufacturing those products have less demand and are therefore making less money with which to pay their personnel. This may then lead to more unemployed over time. With this in mind, how will the government help to repair the unemployment of its people? Which fiscal policies are in place and

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