This is “Aggregate Supply and Demand, the Growth Diamond, and Financial Shocks”, chapter 23 from the book Finance, Banking, and Money (v. 1.0). For details on it (including licensing), click here.

For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (8 MB) or just this chapter (566 KB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).

Has this book helped you? Consider passing it on:
Help Creative Commons
Creative Commons supports free culture from music to education. Their licenses helped make this book available to you.
Help a Public School
DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators.

Chapter 23 Aggregate Supply and Demand, the Growth Diamond, and Financial Shocks

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Describe the aggregate demand (AD) curve and explain why it slopes downward.
  2. Describe what shifts the AD curve and explain why.
  3. Describe the short-run aggregate supply (AS) curve and explain why it slopes upward.
  4. Describe what shifts the short-run AS curve and explain why.
  5. Describe the long-run aggregate supply (ASL) curve, and explain why it is vertical and what shifts it.
  6. Explain the term long term and its importance for policymakers.
  7. Describe the growth diamond model of economic growth and its importance.
  8. Explain how financial shocks affect the real economy.