The AD-AS model combines

Question

Quizplus · Accepted Answer

The AD-AS model combines both a short-run AS curve and a long-run AS curve, along with an AD curve. This allows for analysis of both short-run fluctuations in output and prices, as well as the long-run determinants of potential output and price level. The short-run AS curve is upward sloping, indicating that higher prices result in higher output, while the long-run AS curve is vertical, indicating that potential output is determined by factors such as technology and resources, and is not affected by changes in the price level in the long run. The AD curve represents the total demand for goods and services in the economy, and the intersection of the AD and AS curves determines the equilibrium output and price level.

The AD-AS Model Combines