The
aggregate demand-aggregate supply model is the economists'
powerful work horse for the analysis of business cycles.
It builds on the IS-LM and the Mundell-Fleming models, and shares
their short-run properties. It is more general and more refined,
however, because
it gives a more serious treatment of the supply side by including
the labour market, and
it links the short run with the long run because of its dynamic
nature.
This section offers elearning
resources ranging from animated looks at the foundations and
mechanics of the AD-AS and DAD-SAS models to interactive applets
equipped with carefully designed guided exercises.
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A brief summary
of the economic reasoning behind the AD curve, supported
by a series of animations that show how the AD curve
is related to the goods market, the money market
and the foreign exchange market.
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This educational
viewlet show how to move the aggregate-demand curve
from the price-income diagram to the inflation-income diagram.
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A concise description
of how the AS curve can be derived from the labour
market - also supported by some quite elaborate animations.
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This applet
features the AD-AS model which traces the price level
and income. Make your first hands-on experience with the model's
dynamics and the role of inflation expectations formation.
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Another animation.
It focuses on how the DAD curve and the SAS curve interact in
the DAD-SAS model, using monetary policy as an example.
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This applet
displays the DAD-SAS model. It has the same structure
as the AD-AS model, but focuses on inflation rather than the
price level. Guided exercises let you experiment with shocks
and policy.
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This applet
features a more realistic (though more complex) version of the
aggregate demand-aggregate supply model - the DAD-SAS model
with income persistence.
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