Transcription of The Aggregate Supply - Aggregate Demand Model
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The Aggregate Supply - Aggregate Demand Model
1 Some versions of this Model use the price level instead of the inflation rate to make the modelmore consistent with its microeconomics counterpart. Using the inflation rate, as is done here, producesresults that are a little more 2 THE Aggregate Supply - Aggregate Demand MODELThe first formal macroeconomics Model introduced by the text is called the Aggregate Supply - Aggregate DemandModel, which will hereafter be referred to as the AS/AD Model . The AS/AD Model is useful for evaluating factors andconditions which effect the level of Real Gross Domestic Product (GDP adjusted for inflation) and the level of Model is an aggregation of the elementary microeconomic Supply -and- Demand Model discussed in the previouschapter.
6This explanation requires one more qualification. Since the inflation rate is being represented on the vertical axis, it is more accurate to say that an increase in the rate of cost inflation will shift the aggregate supply curve to the left. Figure 2.3 Costs and Productivity
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