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Macroeconomics: Theory and Policy by Vanita Agarwal

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18

Aggregate Demand and Aggregate Supply

After studying this topic, you should be able to understand

  • The aggregate demand curve charts out the IS–LM equilibrium while holding the nominal money supply and autonomous expenditures constant but allowing the prices to change.

  • Shifts in the IS curve or the LM curve lead to shifts in the aggregate demand curve.

  • Shifts in the IS and LM curves occur due to changes in the monetary or fiscal policy.

  • According to the classical approach, the short-run aggregate supply curve is vertical.

  • According to the Keynesian approach, the short-run aggregate supply curve is horizontal.

  • It has also been put forward that the short-run aggregate supply curve is upward sloping.

  • The intersection of the aggregate demand ...

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