Aggregated supply-based growth is dependant on the total of all goods and services, which companies produce in a given period. Aggregated demand-based growth entails the total expenditure by the firms, households, and the government in a given period. Firms measure an increase in aggregated demand in terms of finished goods, and total money exchanged for products and services while in supply, it is measured in terms of total output. The aggregated supply is responsible for generating income for the economy known as national income, while aggregated demand measures the demand for factors of production.
Factors such as prices, technology, labor market, and other elements of production cause the shifting of the supply curve. When the aggregated supply curve shifts to the right, it shows the capital increases. Shifting to the right indicates that there is a positive effect on the curve, while prices are kept constant. Besides, an increase in factors of production search as technology will cause the curve to shift outwards. When the curve shifts to the right, prices drop significantly as the number of goods rises. Moving of the supply curve to the right indicates a direct relationship with the supply curve (Fazzari et al.,2018)
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As a policymaker, I would prefer the strategies of a steady aggregated demand and supply growth. The law of supply indicates that a better economy is where the demand and supply are at equilibrium. At this point, there is no surplus or shortage of goods and services, and prices stabilized. When the economy is at equilibrium, individuals are more likely to experience growth in infrastructures, health care delivery systems, and technology. Inequality in income distribution is one of the challenges been experienced in the United States ( Reifschneider et al., 2015). It limits the growth and development of the economy because most people end high saving. As a policymaker, I would recommend expansionary strategies such as low-interest rates and an increase in wages for middle earners. In this case, it will allow the stabilization of income and raise standards of living.
Reference
Fazzari, S. M., Ferri, P., &Variato, A. M. G. (2018). Demand-led growth and accommodating supply. Available at SSRN 3108711 .
Reifschneider, D., Wascher, W., & Wilcox, D. (2015). Aggregate Supply in the United States: recent developments and implications for the conduct of monetary policy. IMF Economic Review , 63 (1), 71-109.
