The short-run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply curve.

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This is the basic model of the aggregate demand-aggregate supply framework, where the equilibrium level of real output and the price level are determined by the intersection of the aggregate demand and short-run aggregate supply curves. This assumes that prices and wages are sticky in the short-run, so changes in aggregate demand can lead to changes in output while the price level adjusts gradually.

The Short-Run Equilibrium Level of Real Output and the Price