Title Details: | |
Aggregate Demand and Aggregate Supply: AD-AS model |
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Authors: |
Kyrikos, Dimitrios |
Reviewer: |
Vlassis, Minas |
Subject: | LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > GENERAL AGGREGATIVE MODELS LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MACROECONOMICS: CONSUMPTION, SAVING, PRODUCTION, EMPLOYMENT, AND INVESTMENT LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > PRICES, BUSINESS FLUCTUATIONS, AND CYCLES LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MONEY AND INTEREST RATES LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MONETARY POLICY, CENTRAL BANKING, AND THE SUPPLY OF MONEY AND CREDIT LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MACROECONOMIC POLICY, MACROECONOMIC ASPECTS OF PUBLIC FINANCE, AND GENERAL OUTLOOK LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > INTERNATIONAL ECONOMICS > MACROECONOMIC ASPECTS OF INTERNATIONAL TRADE AND FINANCE |
Description: | |
Abstract: |
When the price level varies, there is an additional endogenous variable that characterizes macroeconomic equilibrium along with output and the interest rate. Therefore, the determination of the price level requires the extension of the IS-LM model to include an additional equilibrium condition. This condition comes from the labor market and gives a relationship between output and the price level. Technically, we combine IS and LM into a relationship referred to as aggregate demand (AD), while the relationship between output and the price level, arising from the workings of the labor market, defines the aggregate supply (AS). The interaction of AD and AS determines macroeconomic equilibrium and allows us to examine the effects of policies affecting either AD or AS, as well as the crucial role of price expectations. Also, policy effectiveness is discussed for the cases of a liquidity trap and secular stagnation.
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Linguistic Editors: |
Kalokyri, Anastasia |
Technical Editors: |
Karamolegkou, Maria |
Type: |
Chapter |
Creation Date: | 2015 |
Item Details: | |
License: |
http://creativecommons.org/licenses/by-nc-nd/3.0/gr |
Handle | http://hdl.handle.net/11419/1565 |
Bibliographic Reference: | Kyrikos, D. (2015). Aggregate Demand and Aggregate Supply: AD-AS model [Chapter]. In Kyrikos, D. 2015. Macroeconomic Analysis and Policy [Undergraduate textbook]. Kallipos, Open Academic Editions. https://hdl.handle.net/11419/1565 |
Language: |
Greek |
Is Part of: |
Macroeconomic Analysis and Policy |
Publication Origin: |
Kallipos, Open Academic Editions |