Aggregate Demand

I can explain

• why the AD curve is downwards sloping

• the components of AD = C + I + G + (X-M)

• factors that can cause a change to the levels of consumption

• factors that can cause a change to the levels of Investment

• factors that can cause a change to the levels of Government Spending

• factors that can cause a change to the levels of Net Exports

I can draw and explain:

• an AD curve and shifts in the AD curve

New Classical/Monetarist View of Aggregate Supply

I can explain  (using diagrams):

• why the SRAS is an upward sloping curve

• factors that can cause a shift in the SRAS

• the Short Run Equilibrium and Actual Output is where AD=SRAS

• why the LRAS represents the potential output of the economy and the Natural Rate of Unemployment

• why in the Long Run, the economy is always at its full potential in the classical view

• short run changes in AD can cause inflationary/deflationary gaps

• short run changes in SRAS can cause stagflation or lower APL with higher real GDP

• how, in the long run, due to price flexibility how the economy will correct itself if it enters an inflationary or deflationary gap

Keynesian View

I can explain (using diagrams):

• the shape of the Keynsian AS curve

• how, in the Keynesian view, the economy is in equilibrium at any point along the curve.

• how, in the Keynesian view, the economy can become stuck in a recessionary gap due to price/wage inflexibility 

• how, in the Keynesian view, an increase in AD does not lead to inflation until the economy approaches its full potential due to spare capactity

New Classical/Monetarist v Keynesian View

I can compare and contrast:

• the similarities and differences between both macroeconomic views of the economy.