Aggregate demand and supply represent part of the business 'playing field'.
The impacts of economic policies on aggregate supply and demand are not always as expected or desired.
Aggregate supply and demand fiji email list are theoretical constructs of practical business interest. Ultimately, a company is not a bubble and any manager is interested in knowing how the economy evolves.
In this sense, aggregate demand and supply show two images of what happens outside the company, but also of what can happen. However, this type of analysis must be examined with a certain critical perspective . Not everything is as mechanical as it seems and the greatest business lessons often arise from doubt. Possible scenarios must be anticipated and possible reactions to each of them must be assessed.
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What are aggregate supply and demand?
They are theoretical constructions of macroeconomists that help us better understand how the economy works . In general, we can say that behind them there are two curves whose shape and movements depend on the assumptions we make:
A demand curve , showing combinations of prices and output levels at which there is equilibrium in the goods and money markets and in the balance of payments .
A supply curve closely linked to the circumstances of the labour markets.
Aggregate demand and supply are represented by curves of various shapes, positions and movements.
On the other hand, it is very important for companies to understand the environment . There are disturbances that can move economic equilibrium. For example, an increase in the cost of energy can reduce supply at any price level. There can also be positive shocks , such as a technical advance that allows productivity and supply to increase.
Furthermore, some macroeconomists consider that supply or demand can be affected by cyclical factors . This means that the influence goes through successive stages that are repeated every certain period of time.
On the other hand, there are a variety of economic policy initiatives that aim to influence aggregate supply or demand. They do not always have the desired effects. It is not as simple as passing a measure in one direction or another and the economy functioning better. However, beyond that, it is often the case that these policies have business impacts that must be followed.
Sage
Approaching the business impact of economic policy on aggregate demand and supply requires a certain critical spirit and the ability to anticipate diverse scenarios.
Aggregate demand policies
There are two types of aggregate demand policies , depending on their objectives:
Expansive , when they aim to boost production. They fight against the fact that there are unused resources, such as unemployed workers or material resources.
Contractive , mainly aimed at combating inflation.
Depending on their instruments , we can distinguish three major types of policies: fiscal, monetary and exchange rate. Let's see how they behave.