The intersection of the short-run aggregate supply and demand curves yields the equilibrium price level and total output level in the short run. In the short term, output may be below or above potential output.
What is the shape of the supply and demand curve overall?
- The aggregate demand/aggregate supply model is a macroeconomic model that explains how total supply and total demand interact to determine total supply or total demand for the economy. The total amount of product that businesses will generate and sell collectively is known as the aggregate supply, or the real GDP.
- At each price level, the total amount spent on domestic products and services is displayed on an aggregate demand curve. Below is a diagram of an example aggregate demand curve. The vertical axis measures price level, and the horizontal axis represents real GDP, just like in an aggregate supply curve.
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