Short-run fluctuations in the economy
Because using aggregate demand and aggregate supply is a good way to see the big picture of the economy, which is most of the point of macroeconomics, and because they can be related to each other in meaningful, logical ways.
nothing
When aggregate demand and aggregate supply both decrease, the result is no change to price. As price increases, aggregate demand decreases, and aggregate supply increases.
Fiscal policy is centered on aggregate demand.
No effect. Spending will decrease Aggregate Demand, lower taxes will raise Aggregate Demand
Because using aggregate demand and aggregate supply is a good way to see the big picture of the economy, which is most of the point of macroeconomics, and because they can be related to each other in meaningful, logical ways.
nothing
When aggregate demand and aggregate supply both decrease, the result is no change to price. As price increases, aggregate demand decreases, and aggregate supply increases.
Fiscal policy is centered on aggregate demand.
No effect. Spending will decrease Aggregate Demand, lower taxes will raise Aggregate Demand
The interest rate does affect aggregate demand. As the interest rate falls, aggregate demand increases and vice-versa.
Aggregate demand curve.
Aggregate simply means a collection of things. So aggregate demand is the total quantity of an economy's final good and services demanded at different price levels. Aggregate supply is the total quantity of final goods and services that firms in the economy want to sell at different price levels. These are used primarily in Macroeconomics to calculate how the economy is doing as a whole.
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
The aggregate demand curve shifts to the right
The quantity of full employment in the aggregate supply aggregate demand model is similar to the conditions in which other model. (Market Supply and Demand.)
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.