1 Introduction Chapter 9 introduced the model of aggregate demand and aggregate supply. ■Long run prices flexible 一 output determined by factors of production technology 一 unemployment rate equals its natural rate ▣Short run -prices fixed output determined by aggregate demand unemployment is negatively related to output CHAPTER 10 Aggregate Demand I slide 3 CHAPTER 10 Aggregate Demand I slide 3 Introduction ▪ Chapter 9 introduced the model of aggregate demand and aggregate supply. ▪ Long run – prices flexible – output determined by factors of production & technology – unemployment rate equals its natural rate ▪ Short run – prices fixed – output determined by aggregate demand – unemployment is negatively related to output 1