Macroeconomics › Section K · The aggregate demand and aggregate supply model › Topic K.1
Macroeconomic views of demand and supply
Is the size of an economy set by what it can produce, or by what people are willing to spend? Two slogans, Say's law and Keynes' law, sum up the two answers, and each turns out to be right over a different stretch of time.
In this topic
- Two camps, one question
- Say's law: supply creates its own demand
- Where Say's law strains
- Worked example: following the income
- Keynes' law: demand creates its own supply
- Where Keynes' law strains
- Worked example: a supply story or a demand story?
- The short run and the long run
- Schools of thought
- Common mistakes to avoid
- Key takeaways
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