Macro economic policies concerning aggregate supply

m ABSTRACT Aggregate supply, with aggregate demand, plays an important role explaining the relationship between macroeconomic variables. Through aggregate demand we can examine only one part of economic problems including recessions and unemployment. However, most of the major economic problems are on the supply-side. Aggregate supply-aggregate demand model is a basic macroeconomic tool for examining these problems and also for studying output fluctuations as well as the price level. This tool is widely used for determining the reasons behind why an economy deviates from a path of smooth growth. It is also used to explore the consequences of government policies aiming to reduce unemployment, to smooth output fluctuations and to maintain stable prices. In order to find out the effects of changes in aggregate demand to the economy, determining the slope of aggregate supply is a major economic problem in today's macroeconomics. In this study, we have examined the determinants of aggregate supply and also analysed supply-side policies that effects output and employment. As a result, we have tried to explain the relation between output and macroeconomic variables.