To analyze an economy, certain statistics can be used to predict the economy's future. This is important because it helps prepare people for prosperity or hard times. Certain indicators can be used to determine the future of aggregate demand and others can be used to determine aggregate supply. Using eight aggregate demand indicators and four aggregate supply indicators we developed a prediction for the economy in the near future.
Changes in aggregate demand are reflected in changes of GDP. To find valuable indicators of the future aggregate demand is to find statistics that tell about change in the components of GDP (C+I+G+Nx). Aggregate supply is influenced by the costs of production to producers and the advent of new or better factors of production and technologies. The indicators we chose as meaningful are also ones used by the Federal Reserve to determine interest rates, automatically validating them as important.
The trade deficit is one of the aggregate demand
The first formal macroeconomics model introduced by the text is called the Aggregate Supply Aggregate Demand Model, which will hereafter be referred to as the AS/AD model. The AS/AD model
is useful for evaluating factors and conditions which effect the level of Real Gross Domestic Product(GDP adjusted for inflation) and the level of inflation. Like the microeconomic model, the AS/AD model is a comparative statics model. The model's insights, therefore, are obtained by identifying and initial equilibrium condition, then "shocking" the model by charging one or more of the parameters, then evaluating the resulting new equilibrium.
In recent years, many macroeconomic textbooks at the principles and intermediate levels have adopted the aggregate-supply/aggregate-demand (AS-AD) framewor ...