o entrust a nation's fiscal policy to them - but each model does bring us closer to an understanding of the complex dance that occurs between supply and demand.
This relationship is also related to overall employment rates, for the connection between supply and demand (while it can be expressed abstractly) is also one based in real-world relationships, including the relationship between the number of workers employed and the amount of total goods that are being produced.
The nation's Gross Domestic Product is an integral part of its aggregate supply and demand, for the GDP is simply the total measures of output of goods and services for any nation. For the United States it is calculated by the Commerce Department using the following items: Personal consumption, government expenditures, private investment, inventory growth and trade balance.
The concepts of supply and demand are essential to understanding the dynamics of an economy, and attempts to bring the aggregate supply and aggregate demand into balance with each other often constitute the most fundamental elements of a government's fiscal policy, which can be either expansionary or contractionary. It is expansionary (the more common description is probably "loose") when taxation is reduced, public spending, interest rates are lowered and credit is easy to obtain. These actions (or any subset of them) are aimed at stimulating the total spending in the economy (http://www.digitaleconomist.com). (This amount of total spending, as noted above, is also known as aggregate demand.) Keynes argued for the centrality of these aspects of the economy in determining its overall health; the fact that such an argument today seems scarcely worth making because it is so obvious speaks to the fundamental ways in which Keynesian economic concepts have infiltrated our thinking about the ways in which economies work.
Expansionary policy tends to occur when a government feels its economy i...