AP MacroeconomicsAggregate Demand & Supply
AD-AS Model
The AD-AS model explains real output and the price level as the intersection of aggregate demand and aggregate supply.
Aggregate demand slopes downward, short-run aggregate supply slopes upward, and long-run aggregate supply is vertical at full-employment output. Short-run equilibrium is where AD meets SRAS; long-run equilibrium is where all three curves intersect. It is the central model for analyzing recessions, inflation, and the effects of fiscal and monetary policy.
Formula / Example
Short-run equilibrium: AD = SRAS. Long-run equilibrium: AD = SRAS = LRAS at potential output (Yf).
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Aggregate Demand & Supply →
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