Question

Distinguish between AD & AS

Answer 1

Answer:

Aggregate Supply (AS) is value of total output that all the firms are willing to supply during the given time period. AD indicates the total demand in the economy, while AS shows the total supply in the economy (both are planned, not actual). AD includes all the sectors whereas AS just deals with the Firm sector.

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Answer 2

• AD ( aggregate demand ) is the sum total of expenditure that the people plan incur on the puchase of goods and services furing accounting year.
• Ad can never be zero.
• AD is postively related to Y, as when income increses demand also increses.

• AS ( aggregate supply ) refer to aggregate production as planned by the producets during the accounting year.
• AS can be zero
• AS implies flow of income Y, as AS =Y

( Note: AS curve is always 45 degree and equal to Y)

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