AD / AS

AD / AS

ADAS = The balance of AD / AS dictates GDPr output and the PL

Three Ranges

Horizontal Range / Keynesian Range

Unemployed resources which results in a recession or a depression

Includes only levels or real output that are less than the full employment output

Intermediate Range

Resources are getting closer to the full employment levels which creates upward pressure on wages and prices

The upward pressure on prices is caused by the cost of doing business 
Sticky wages and/ or sticky prices cause the AS curve to be positively sloped
Wages and prices may be slowed to adjust or sticky if firms or workers lack information

Classical Range

When real GDP is at a level with unemployment at the full employment level and where any increase in demand will result only in an increase in prices

The economy is unable to produce anymore goods and services for a sustainable period of time