14 Questions
In the AD-AS model, which two variables are depicted in the older and static version?
Output and price level
When did the AD-AS model become one of the primary simplified representations of macroeconomic issues?
Around 1970
What is the primary policy instrument in the modified version of a dynamic AD-AS model developed around 2000?
Interest rate
Which economic issue made the AD-AS model an important political issue toward the end of the 1970s?
Inflation
What does the dynamic version of the AD-AS model show in addition to output?
Inflation
In the AD-AS model, what does AS stand for?
Aggregate supply
What is the main difference between the dynamic AD–AS model and the dynamic stochastic general equilibrium (DSGE) models?
The dynamic AD–AS model does not provide a microeconomic foundation, unlike the DSGE models.
What was the contribution of O.H. Brownlee to the AD–AS diagram?
He presented the first full AD–AS model in Y-P space.
What prompted the need for a model that incorporated aggregate supply and could explain changes in the price level?
The inflationary supply shocks of the 1970s.
Which textbooks presented an AD–AS model in the late 1970s and later became widely used?
All of the above
What led to the rise of the dynamic AD–AS version and the traditional version of the IS–LM diagram?
The inflationary supply shocks of the 1970s.
Who published an article in Journal of Political Economy in 1950, which is allegedly the first published version of a full AD–AS model in Y-P space?
O.H. Brownlee
According to A.K. Dutt, where did the AD–AS diagram first make its appearance in 1948?
A contribution to a textbook on applied economics.
What was different about Kenneth E. Boulding's version of the diagram in output-price space compared to Brownlee's version?
Boulding used it as a warning about aggregative thinking.
Learn about the AD–AS model, a macroeconomic model that explains short-run and long-run economic changes through the relationship of aggregate demand (AD) and aggregate supply (AS) in a diagram. It is widely used to understand the dynamics of the economy.
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