Aggregate Demand (AD)

Aggregate demand is the total demand for all goods and services in an economy at different price levels. It is influenced by consumer spending, investment, government spending, and net exports.

Aggregate Supply (AS)

Aggregate supply is the total quantity of goods and services that producers in an economy are willing and able to supply at different price levels.

Short-Run vs. Long-Run

• Short-run aggregate supply (SRAS) can be affected by changes in resources and production costs.
• Long-run aggregate supply (LRAS) reflects the economy’s maximum sustainable output, determined by resources, technology, and institutions.

Macroeconomic Equilibrium

The intersection of AD and AS determines the overall price level and output of the economy.