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Aggregate Demand

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Aggregate Demand and Supply Models
Karen Burke
ECO/372
January19, 2015
Neal Johnson

Aggregate Demand and Supply Models
Unemployment rates are considered an economic factor because of the effect that these rates have on the general economy. These rates affect not only individual households but communities as well, sometimes on quite a large scale. Unemployment affects demand by shifting the aggregate demand curve to the left. There are fewer consumers creating a demand for goods and services. This could also affect those who supply goods in services in that there will be less demand for that particular business and could lead to more unemployment. Unemployment shifts the aggregate supply curve to the left as well. The current U.S. unemployment rate stands at 5.60 percent as of December 2014 (tradingeconomics.com 2015). This number is down from 5.80 percent is November 2014.
There are some analysts who believe that demand is responsible for causing restraints within the U.S. economy. According to Mark Thoma of MoneyWatch “This is an important debate because if the fall in unemployment is mostly structural, there's little that monetary and fiscal policy can do to help to speed the recovery. But if lack of demand is the main culprit, then replacing the lost demand through aggressive policy can help us recover faster.” (cbsnews.com 2012). Therefore it is recommended that the government keep tax rates as the currently stand. Increasing the amount of taxes paid could lead to not only inflation, but further unemployment. It should be the goal of the government to keep the national unemployment rate at its currently low state.

References
Colander, D. C. (2013). Economics (9th Ed.). Boston, MA: McGraw-Hill/Irwin.
Thoma, M. (2012). Demand, not supply, is restraining the economy. Retrieved from

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