what is meant by a recessionary gap and an inflationary gap in the AD/AS model.
Introduction
The AD/AS Model is a macroeconomic model used to analyze and explain the aggregate demand and aggregate supply of an economy. It is based on the concept of equilibrium in the economy, which is the point at which aggregate demand is equal to aggregate supply.
The AD/AS Model is a graphical representation of the relationship between aggregate demand, aggregate supply, and price level. Aggregate demand is the total amount of goods and services that households, businesses, and the government are willing to buy at a given price level. Aggregate supply is the amount of goods and services that firms are willing to produce at a given price level.
Step by step
Solved in 3 steps
