6.04 The Effects of Monetary and Fiscal Policy in the Macro Economy

Introduction

This lesson will focus on the economic activity in the overall economy. You will be exposed to the total demand and total supply in the country. The terms aggregate demand and aggregate supply will look similar to the supply and demand concepts from an earlier module. The difference is instead of focusing on an individual item, aggregate means adding everything together.

It is at the intersection of aggregate demand and aggregate supply that we can see the price level and output in an economy. Once you understand the basics of the AS and AD curves you will learn the determinants that shift the curves and cause changes in price level and unemployment.

Once you understand how to recognize a country in recession or inflation using AD and AS curves, you can now learn how the Federal Reserve and federal government attempt to rectify the nation's economy when it is not in equilibrium. This lesson will tie together the concepts that you have already learned on recessions, inflation, aggregate demand, aggregate supply, monetary policy and government taxing and spending.