The aggregate demand and aggregate supply model

The aggregate demand (AD) and aggregate supply (AS) model explains the overall economic activity. AD represents the total goods and services consumers, businesses, and the government want to buy at different price levels. AS shows the total goods and services producers are willing to supply at various price levels. The intersection of AD and AS curves indicates the economy's equilibrium price level and output (GDP). Factors like consumer confidence, government policies, and resource availability can shift these curves, influencing inflation, unemployment, and growth. This model helps us understand fluctuations in the economy over time.