The aggregate demand-aggregate supply (AD-AS) model is
A) different from the IS-LM model because it does not show the long-run equilibrium.
B) equivalent to the IS-LM model but focuses on the relationship between price and output rather than the interest rate and output.
C) different from the IS-LM model because it does not show the short-run equilibrium.
D) equivalent to the IS-LM model but focuses on the relationship between the interest rate and output rather than price and output.

Question

Quizplus · Accepted Answer

The AD-AS model is equivalent to the IS-LM model in that it also shows the equilibrium output, but focuses on the relationship between price level and output, rather than the interest rate and output. Therefore, it is different from the IS-LM model, but both models show the long-run equilibrium. Choice A and C are incorrect because both models show both short-run and long-run equilibria. Choice D is incorrect because the IS-LM model focuses on the relationship between the interest rate and output, while the AD-AS model focuses on the relationship between price level and output.

The Aggregate Demand-Aggregate Supply (AD-AS) Model Is