# Use diagrams and narrative to explain changes in: Aggregate Demand and Aggregate Supply Money Demand Money Supply Exchange rate of the dollar.

### Economic Output

In economics, output is the quantity of goods and services produced in a given time period. The level of output is determined by both the aggregate supply and aggregate demand within an economy. National output is what makes a country rich, not large amounts of money. For this reason, understanding the fluctuations in economic output is critical for long term growth. There are a series of factors that influence fluctuations in economic output including increases in growth and inputs in factors of production. Anything that causes labor, capital, or efficiency to go up or down results in fluctuations in economic output.

### Aggregate Supply and Aggregate Demand

Aggregate supply is the total amount of goods and services that firms are willing to sell at a given price in an economy. The aggregate demand is the total amounts of goods and services that will be purchased at all possible price levels.

In a standard AS-AD model, the output (Y) is the x-axis and price (P) is the y-axis. Aggregate supply and aggregate demand are graphed together to determine equilibrium. The equilibrium is the point where supply and demand meet to determine the output of a good or service.

### Short-run vs. Long-run Fluctuations

Supply and demand may fluctuate for a number of reasons, and this in turn may affect the level of output. There are noticeable differences between short-run and long-run fluctuations in output.

Over the short-run, an outward shift in the aggregate supply curve would result in increased output and lower prices. An outward shift in the aggregate demand curve would also increase output and raise prices. Short-run nominal fluctuations result in a change in the output level. In the short-run an increase in money will increase production due to a shift in the aggregate supply. More goods are produced because the output is increased and more goods are bought because of the lower prices.

AS-AD Model: This AS-AD model shows how the aggregate supply and aggregate demand are graphed to show economic output. The AD curve shifts to the right which increases output and price.

In the long-run, the aggregate supply curve and aggregate demand curve are only affected by capital, labor, and technology. Everything in the economy is assumed to be optimal. The aggregate supply curve is vertical which reflects economists’ belief that changes in aggregate demand only temporarily change the economy’s total output. In the long-run an increase in money will do nothing for output, but it will increase prices.

### Question Description

1. You, being a supplier of steak dinners, opened your steak house. Assume the market-clearing price is \$20 and the market clearing quantity is 500 for a steak dinner; (however, you do not have this information). You, the owner of the steak diner, decide to price your steak dinners at \$15.00. You notice that when you do this you could have sold 650 steak dinners but are willing and able to sell only 400. Draw this situation on a graph. Put all numbers given on your graph. What will happen in this market? Will there be a shortage or a surplus? Show this on your graph. What will happen in this market (assume there are no price controls). 2) A news released proved the inefficiency of hybrid vehicles. However, 2 months ago the number of dealers offering various hybrid models nearly tripled. How will this affect the price of hybrid vehicles? Use economic terms and well labelled diagrams in your answers.

2.Peter Drucker, considered the father of management, stated. “It is change that always provides the opportunity for the new and different.” How will industries and world economies and payment structure change in a post Covid-19 world? Read the Following Article. https://rejournals.com/covid-19-and-the-industrial… What will happen to low paying service jobs; the workers that are essential now, Grocery stockers, delivery, cleaners, etc. What will happen to commercial real estate, rents paid by restaurants, companies etc

3. Read the following Article: https://www.dallasfed.org/research/economics/2020/… Use diagrams and narrative to explain changes in: Aggregate Demand and Aggregate Supply Money Demand Money Supply Exchange rate of the dollar.