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Ken McCormick

In: 21st Century Economics: A Reference Handbook

Chapter 32: Aggregate Demand and Aggregate Supply

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Aggregate Demand and Aggregate Supply
Aggregate demand and aggregate supply

The aggregate demand/aggregate supply (AD/AS) model appears in most undergraduate macroeconomics textbooks. In principles courses, it is often the primary model used to explain the short-run fluctuations in the macroeconomy known as business cycles. At the intermediate level, it is typically linked to an IS/LM model. The IS/LM model is a short-run model, and in intermediate macroeconomics classes, the AD/AS model serves as a bridge between the short run and the long run. Many economists find the model to be useful in thinking about the macroeconomy.

People often assume that textbooks present settled theory. It might therefore be a surprise to some that economists do not universally accept the AD/AS model. It has, in fact, been the ...

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