The three main components of the aggregate demand-aggregate supply model include
A) AD, SRAS, and LM.
B) SRAS, LIRAS, and IS.
C) AD, IS, and LM.
D) AD, SRAS, and LRAS.

Question

Quizplus · Accepted Answer

The three main components of the aggregate demand-aggregate supply model are AD (aggregate demand), SRAS (short-run aggregate supply), and LRAS (long-run aggregate supply). These three components are used to analyze the behavior of the economy as a whole, including the levels of output, employment, and prices over time. The AD curve shows the level of output that is demanded by households, businesses, and the government at different price levels. The SRAS curve shows the level of output that is supplied by firms in the short-run at different price levels. The LRAS curve shows the level of output that is supplied by firms in the long-run, assuming that all prices and wages have fully adjusted.

The Three Main Components of the Aggregate Demand-Aggregate Supply Model