AS/AD Model Flashcards
1
Q
Why do we need the AD/AD model?
A
To analyse the impact of changes in AD or AS on the economy’s OUTPUT and it’s average PRICE LEVEL
2
Q
What does the AD curve reflect?
A
A negative relationship between AD and the GDP Deflator
3
Q
What impact does a POSITIVE demand shock have on the AD curve?
A
Moves curve to the RIGHT
e.g. higher confidence
