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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.

Page 3 3There are considerable tax advantages of using home equity loans to encourage this activity as well. Interest paid on home equity loans are deductible from taxable income, reducing the consumer's income tax burden. 4 Unfortunately, nothing is ever quite so simple as this. Some theories claim, for example, that even

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