May 27, 2004
Aggregate Demand / Aggregate Supply
The Keynesian aggregate demand curve is obtained by considering different price levels for a fixed money supply. Changing G, T, or M then shifts the AD curve.
The AS/AD diagram's implications depend on the slope of the aggregate supply curve.
An upward sloping AS curve plus a shifting Keynesian AD curve implies something similar to a Phillips Curve:
A shifting classical AS curve has distinctly different implications for the relationship between inflation and unemployment.
