Using AD-AS diagram show how the change in productivity in the Ghanaian economy in 2017 affected the Real GDP and prices

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Using AD-AS diagram show how the change in productivity in the Ghanaian economy in 2017 affected the Real GDP and prices

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Step 1

Aggregate Demand -: 

                                    It refers to the amount of total spending on domestic goods and services which are produced in an                                     economy at given price level within a given period of time. 

 

Aggregate demand includes four components of demand:-

1. Consumption

2. Investment

3. Government spending

4. Net exports (Exports - Imports)

Step 2

Diagram of Aggregate Demand Curve -: 

                                                                      The Downward-sloping Aggregate Demand curve shows the inverse relationship between the price level for outputs and the quantity of total spending in the economy.

                                                                      Economics homework question answer, step 2, image 1

Step 3

Aggregate Supply -: 

                                    It refers to the total quantity of output that the firms produce at given price levels during a given period of time or in other words we can say it the Real GDP.

 

Main components of aggregate supply are Consumption and Saving. A major portion of income is spent on consumption of goods and services and the balance is saved.

Thus, national income (Y) or aggregate supply (AS) is sum of consumption expenditure (C) and savings (S).

 

                                           Y = AS = C + S

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