Question

What are the different effects between aggregate demand-based growth and aggregate supply-based growth?

Answer 1

Answer:

Aggregate demand is just the sum total of four components such as  consumption, investment, government spending, and lastly net exports. Government spending and taxes are determined by political considerations with which imports and exports changes according to relative growth rates and prices between two economies. while Aggregate supply is just the total amount of goods and services that firms are willing to sell at a given price in an economy. The aggregate demand is the total amounts of goods and services that will be purchased at all possible price levels in an economies

Boosting aggregate demand also boosts the size of the economy regarding measured GDP. However, this does not prove that an increase in aggregate demand creates economic growth while for Aggregate supply is the total quantity of output firms will produce and sell, that is to, the real GDP.

The aggregate supply curve slopes up because when the price level for outputs increases while the price level of inputs remains fixed, the opportunity for additional profits encourages more production.