Economics · Unit 3: Macroeconomics

EC3.2 — Variations in economic activity, aggregate demand and aggregate supply

Economics · SL / HL · syllabus-mapped notes

1. EC3.2.1

   Aggregate demand (AD)

   Explain aggregate demand and why the AD curve slopes downward.

2. EC3.2.2

   Components of AD: consumption (C) + investment (I) + government spending (G) + net exports (total exports [X] - total imports [M])

   Explain the four components of aggregate demand, consumption, investment, government spending, and net exports.

3. EC3.2.3

   Determinants of AD components

   Explain what determines each component of AD, from consumer confidence and interest rates to exchange rates and trade policy.

4. EC3.2.4

   Shifts of the AD curve caused by changes in determinants

   Show how a change in any determinant shifts the AD curve, and what happens to output and the price level.

5. EC3.2.5

   Short-run aggregate supply (SRAS) curve and determinants of the SRAS curve

   Explain short-run aggregate supply and how factor costs and indirect taxes determine it.

6. EC3.2.6

   Shifts of the SRAS curve

   Show how a change in production costs shifts the SRAS curve.

7. EC3.2.7

   Alternative views of aggregate supply (AS)

   Explain the monetarist/new classical LRAS curve and the Keynesian AS curve, and where each locates an inflationary or deflationary gap.

8. EC3.2.8

   Shifts of the AS curve over the long-run (monetarist/new classical LRAS) or over the long term (Keynesian AS)

   Explain how changes in the quantity and quality of factors, technology and efficiency shift aggregate supply over the long run.

9. EC3.2.9

   Assumptions and implications of the monetarist/new classical and Keynesian models

   Evaluate the assumptions of the monetarist/new classical and Keynesian models, and what each implies for government policy.