The Aggregate Demand and Aggregate Supply Model

Previously, we discussed the Demand and Supply and Supply model. Our discussion then was about the individual consumer or producer. We have also discussed the determinants of demand and supply. This weekweagain talk about demand and supply. However, we are now focusing on Aggregate Demand (AD) and Aggregate Supply (AS). The AD-AS model is a very powerful model that helps us understand how the macro economy works. It helps us analyze the state of the economy at a given point in time and understandthe implications of government policies. To begin the discussion, let's define aggregate demand, aggregate supply, and potential GDP. What are the reasons for the downward sloping AD curve? What are the differences between the neoclassical and Keynesian perspectives? What factors cause each curve in the AD-AS model shift, and what are the implications of such changes on the level of real GDP and the price level?