Question

How can we use aggregate demand and aggregate supply model to illustrate business cycle and how can we use AD AS model to see effects of various events on rGDP and inflation​

Answer 1

Answer:

The AD-AS (aggregate demand-aggregate supply) model is a way of illustrating national income determination and changes in the price level. We can use this to illustrate phases of the business cycle and how different events can lead to changes in two of our key macroeconomic indicators: real GDP and inflation.