Examining+Price+Fluctuations

=Examining Price Fluctuations = When quantity demanded exceeds quantity supplied, prices go up and the purchasing power of a dollar goes down. When quantity supplied is greater than quantity demanded, prices go down and the purchasing power of a dollar goes up. These changes in price and in the purchasing power of the dollar have many effects on society. Economists study price changes throughout the economy in order to understand these effects.

** Price Level ** 
 * Reflects prices throughout the economy at a particular time
 * Influences aggregate supply and aggregate demand
 * ** Aggregate Supply **
 * Total amound of goods and services produced throughout the economy
 * Increases when price level increases
 * ** Aggregate Demand **
 * Total amount of spending by individuals and businesses throughout the economy
 * Increases when price level decreases
 * Inflation **
 * An increase in the average price level of all products in an economy
 * Occurs when aggregate demand increases faster than aggregate supply
 * Quantity demanded exceeds quantity supplied --> consumers must compete for limited products --> prices go up --> the amount that a dollar buys decreases
 * Reduces the real purchasing power of the dollar
 * <span style="color: #887649; font-family: 'Lucida Sans Unicode', 'Lucida Grande', sans-serif;">Deflation **
 * <span style="font-family: 'Lucida Sans Unicode', 'Lucida Grande', sans-serif;">A decrease in the average price level of all goods and services in an economy
 * <span style="font-family: 'Lucida Sans Unicode', 'Lucida Grande', sans-serif;">Occurs when aggregate demand decreases faster than aggregate supply
 * <span style="font-family: 'Lucida Sans Unicode', 'Lucida Grande', sans-serif;">Quantity supplied exceeds quantity demanded --> sellers must lower prices to attract buyers --> prices decrease --> the amount that a dollar buys increases
 * <span style="font-family: 'Lucida Sans Unicode', 'Lucida Grande', sans-serif;">Boosts the real purchasing power of the dollar