Note: This is post #110 in a weekly video series on basic economics.
A concept that can help us understand business fluctuation is the aggregate demand–aggregate supply model, or AD-AS model. The aggregate demand curve shows us all of the possible combinations of inflation and real growth that are consistent with a specified rate of spending growth.
In the video by Marginal Revolution University, Alex Tabarrok explains how the aggregate demand curve show us all of the possible combinations of inflation and real growth that are consistent with spending growth.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.