Factors Affecting Aggregate Demand and Supply
This article discusses the factors that affect aggregate demand and supply in an economy. Aggregate demand is the total amount of goods and services that consumers, businesses, and the government are willing to purchase. Aggregate supply is the total amount of goods and services that businesses are willing to produce.
Here are some of the factors that affect aggregate demand:
- Consumer spending
- Investment spending
- Government spending
- Net exports
Here are some of the factors that affect aggregate supply:
- Shortage of factors of production
- Technological progress
- Government policies
Changes in aggregate demand and supply can affect the price level in a number of ways. For example, if aggregate demand increases, the price level will tend to increase. Conversely, if aggregate supply increases, the price level will tend to decrease.