Aggregate Demand and Aggregate Supply Model

The Aggregate Demand (AD) and Aggregate Supply (AS) model explains how the overall economy's total production and spending determine economic health. AD represents the total goods and services consumers, businesses, and governments want to buy at various price levels, influenced by factors like income and confidence. AS shows the total goods and services producers are willing to supply at different prices, affected by resources and technology. The intersection of AD and AS indicates the economy's equilibrium, balancing prices and output. Changes in either can lead to economic growth, inflation, or recession, helping policymakers understand and respond to economic shifts.