Unit 3.2 · Variations in Economic Activity: Aggregate Demand and Aggregate Supply
Macroeconomic Equilibrium
AO2AO4Diagram required
Syllabus Requirement
Equilibrium occurs where AD intersects SRAS or LRAS; different implications under monetarist vs. Keynesian models.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
Macroeconomic equilibrium refers to the state where aggregate demand equals short-run aggregate supply, determining the overall price level and real GDP. Changes in either aggregate demand or short-run aggregate supply can shift this equilibrium, impacting economic output and prices. Understanding these dynamics is essential for analyzing economic fluctuations and policy responses.