9 С Listening 4)))

Now listen and check your answers.

I^f Ro^Hinn 9

Before you read

Discuss the following with your partner.

Aggregate demand

In some ways, running a large economy is like

running a small business. What do you think are and aggregate supply

the similarities and what are the differences?

ф D Vocabulary

Complete each sentence with a word or phrase from the box.

aggregate

availability

behave

exports

long run

predict

required

short run

trend

The price of a flight often depends on the

of seats.

Teclmology is making it easier and easier to

changes in the weather.

When talking about the we mean the total. Some people very differently when they go abroad.

The means in the next few weeks or months. The means in the coming years or decades. China's include all kinds of

manufactured goods.

Л lot of raw materials for

manufacturing are imported.

Prices aire still following a

to increase.

When a company makes plans lor how much to produce and what prices to set. it needs information. The company needs to predict the level of supply that will he required to meet demand. It needs to set prices that will keep the business running. In the same way. governments need this information for the whole economy The total level of demand for all products and services is called the <t!if> rebate denumd. The total supply is called the иццгецate supply.

The demand for products and services is liovv much is wanted. For a company, the demand conies from customers, l-'or a w hole economy, tilings arc a little more complicated. Demand in the whole economy comes from the follow ing

from consumers, because tlicy buy products and services (consumption)

from companies, because they invest money to build factories and buy machines (investment)

from the government, because they spend money on services and projects (government spending!

from exports, because these are sales lo customers in other countries (export)

Prices

A

Figure 1: Aggregate Demand

Prices

Figure 2: Aggregate Supply

I O'H) run

Real National Income Real National Income

Mum j - C. • <1 • г ' (-•-•- т. U r . • tj 63

Although aggregate demand is made up ol many tilings, it Ih huii S in the same way as demand tor a single produet For example, demand rises when incomes rise. The same applies to aggregate demand Similarly, demand falls as prices rise. The same is true for aggregate demand. You can see this relationship shown in figure 1 on page o.V Tlu- vertical axis shows prices The horizontal axis shows real national income Real national income is the value of all the services and products produced by the whole economy. It's calculated in the same way as aggregate demand (consumption, investment, government spending and exports). You can see from the curve that national inOGOte (and therefore aggregate demand) increases as prices fall

Changes in any of the four things which make up aggregate demand will cause a shift in demand For example, if the government decides to spend a huge amount of money on building new hospitals and schools, this will have an effect on the whole economy. Aggregate demand will increase at all price levels. This is shown in aggregate demand curve 2 I Al>2) in figure 1

l he supply curve for .in individual product or service is very simple As the company increases its supply to the market, it increases the price. But what about aggregate supply for the whole economy'' This is more complex. In the short run. aggregate supply follows the same trend as tlu supply for a single product. Supply rises as prices rise. However, the long run is different In tlu long run. supply is not affected by price In the long run. production is limited by the factors of production In other words, what a country can supply de|4iids on the numlier of factories it has. the number of people working and the availability • >1 raw materials This is why the long run supply curve- in figure 2 on page <>Л is ;i straight lim .

64 Магш111ая Gtiida to Есочеомс» Unit >2

BP E Comprehension

Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1

PARAGRAPH 2 PARAGRAPH 3 PARAGRAPH 4 PARAGRAPH 5

What aggregate demand includes

Two types of aggregate supply curve The relationship between aggregate demand

and price Wiry are aggregate supply and demand important to governments? What causes aggregate demand to shift?

Before you listen

Discuss the following with your partner.

The gross domestic product ( GDP) is a way of measuring the income of a whole nation. -» How do you think GDP is calculated? -» Why do you think some countries have a larger

GDP than others? Which countries in the world do you think have a large GDP? Which ones have a small GDP?