Wo Determinants of Aggregate Demand That You Believe Have the Greatest Impact on Macroeconomic Performance

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Pick two determinants of aggregate demand that you believe have the greatest impact on macroeconomic performance, and do the same for aggregate supply. Justify your choices with examples for each.

When speaking about AD/AS we must take in consideration the involvement of these two in the long run and short run.

The two determinants of aggregate demand and supply that I believe have the most impacts on Macroeconomic performance are:

1) Fiscal policy: Increase or decrease of government spending. If they increase and spend money, (Explanation) it could permit the government to create roads per say… or it could create more jobs… The government can to reduce peoples taxes, so they can have more money for them to spend money. Fiscal policy can move aggregate demand. The American government takes responsibility of the fiscal policy, which directly affects Aggregate demand.

2) Monetary policy: Is conducted by the Federal Reserve. 7 people that are appointed by the president and must be approved by congress conduct the Federal Reserve’s Boards of governor. The president has a small say about decisions that are taken within the Federal Reserve. The Feds affect the growth rate of the money supply. They have a direct effect on the economy, which affects interest rates; this directly affects aggregate demand.

Example: If there is a decrease in Taxation there will be an increase in supply for producer.

The economy can adjust by itself but it takes too long, but because of Fiscal and Monetary policy this can be fixed in the short run while the economy stabilizes itself. Let’s not forget that governments control the economy that is why I used these two policies compared to any other determinants because these control the economy, not the other way…...

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