Written Assignment InstructionsThe writing assignment requires applying your kno

Written Assignment InstructionsThe writing assignment requires applying your knowledge of how shifts in aggregate demand (AD) and aggregate supply (AS) affect the economy. Relevant knowledge is important because shifts in AD and AS affect all aspects of an economy, including output and unemployment.
Using aggregate demand and aggregate supply, explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Assume that the economy is at full employment before the interest rate increase. Be sure to detail what happens to:
aggregate demand
the price level
the level of GDP
and unemployment.
You will be assessed on the following:
explanation of what happens with the aggregate demand in the short run if the Federal Reserve raises interest rates in the economy
explanation of what happens with the price level in the short run if the Federal Reserve raises interest rates in the economy
explanation of what happens with the level of GDP in the short run if the Federal Reserve raises interest rates in the economy
explanation of what happens with the unemployment rate in the short run if the Federal Reserve raises interest rates in the economy
clarity and APA guidelines
AD and AS Model
Watch: Aggregate DemandThis unit introduces one of the staples of macroeconomic modeling: The Aggregate Demand and Aggregate Supply model (AD/AS model) that represents the foundation of modern macroeconomic analysis in the short and long run. AD represents the total product demand in the economy. AS represents the total product supply. In equilibrium those are equal. Fluctuations of AD represent one of the main outcomes of business cycles. AD increases in expansions and decreases in recessions. In the short-run equilibrium, Aggregate Demand (AD) = Short Run Aggregate Supply (SRAS); but the Short Run Aggregate Supply (SRAS) may depend on price levels (or interest rates). The Long-Run Aggregate Supply (LRAS) represents the productive capacity of the economy and is determined by the level of technology, as well as the amounts of capital and labor. In a long-run equilibrium, AD=LRAS=SRAS. What determines the levels of aggregate demand and aggregate supply? This is important to consider, as fluctuations in both aggregate demand and aggregate supply may result in deep recessions.­­­
Reading AssignmentRead
Read Ch. 11: The Aggregate Demand / Aggregate Supply Model
Watch
Aggregate Demand and Supply Practice
Aggregate Demand and Supply Practice
ReferencesClifford, J. (2020, October 7). Aggregate demand- macro topic 3.1 [Video]. YouTube.
Clifford, J. (2020, October 14). Aggregate supply- macro topics 3.3 and 3.4 [Video]. YouTube.
Clifford, J. (2017, October 31). Aggregate demand and supply practice- macro topic 3.5 and 3.6 [Video]. YouTube.
Geenlaw, S. & Shapiro, D. (2017). Chapter 11 | The aggregate demand/aggregate supply model. In Principals of macroeconomics 2e. Openstax. Licensed under CC-BY 4.0. https://openstax.org/details/books/principles-macroeconomics-2e