Key Takeaways
Lesson Description
Key Takeaways
• Aggregate Demand (AD) represents total spending in the economy.
• Short-Run Aggregate Supply (SRAS) responds to price changes, while Long-Run Aggregate Supply (LRAS) reflects productive capacity.
• Equilibrium output occurs where AD intersects SRAS.
• Changes in AD and AS explain inflation, recession, and economic growth.
• Fiscal and monetary policies aim to stabilize output and prices.
Must Know Models
Aggregate Demand–Aggregate Supply (AD-AS) Model
Long-Run Aggregate Supply (LRAS)
Must Know Equations
Aggregate Demand:
AD = C + I + G + (X − M)
Must Know Vocabulary
Aggregate Demand (AD)
Aggregate Supply (AS)
Short-Run Aggregate Supply (SRAS)
Long-Run Aggregate Supply (LRAS)
Demand Shock
Supply Shock
Recessionary Gap
Inflationary Gap
AP Exam Focus
• Draw and interpret AD-AS graphs.
• Explain shifts in AD, SRAS, and LRAS.
• Analyze equilibrium output and price level.