The AS–AD model

Total spending has to be split between higher prices and more output. Aggregate demand says how much spending there is; supply says how the split works out, this year and once wages catch up.

Part I starts with a fixed amount of spending, moves to growth rates and adds long-run supply, with prices fully flexible. Part II sets wages in advance and runs the shocks: a change in money growth, a confidence shock, a look at output levels, supply shocks and a set of mystery economies.

On each page, save a prediction, explore the model, then choose “I’m ready to explain what I found” to open the After question. Your answers stay in this tab only and are cleared when you reload or close the page.