Chapter 33

I would give this chapter a two out of three as I felt that there were a lot of things that I needed to remember in the chapter. We learned about aggregate demand and supply, and looked at it specifically in the short run as well. In the short run economists agree that the classical dichotomy does not hold up as it does in the long run. This is because it takes time for the various markets to respond to changes in many factors. Some factors that affect it are the price level. For instance the short run demand curve could be affected if the value of money doubled consumers would be inclined to both spend more and save more of their money. This is because the price of goods and services still hasn't adjusted to the new value of money and has remained at the old price level. Consumers will also save more as the are in effect "wealthier". A change in the long run would be governments purchases which can affect the demand curve as well by increasing the total demand or reducing the total demand in the market by increasing or decreasing spend. On the short run supply side changes in the price level could also cause a change. If the value of money was halved, companies would be more inclined to supply a greater amount to the market because they would be getting more dollars for each item they sold. A long run example would be a change in the work force, like an influx of immigration shifting the supply curve to the left.