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According to Sloman and Norris (2002, p.320) that the four macroeconomic are highly correlated with aggregate demand. They are the high and stable economic growth, low unemployment, low inflation, and avoidance of substantial balance of payments deficits and excessive exchange rate fluctuation. Baumol and Blinder (1998, p.639) also pointed out that if aggregate demand grows exceptionally high, the economy may reach a short-run equilibrium above full employment in inflationary gap. The gap is between actual and potential gross domestic product output. This is due to output growth rapidly, the labour market forces wages to rise and unemployment to fall at this tight situation.
Approximate Word count = 353
Approximate Pages = 1.4
(250 words per page double spaced)
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