Answer to Question #238116 in Macroeconomics for reinhold

Question

How do economists use the Model of aggregate demand and aggregate supply in their analysis of the economy?

Answer 1

The model of Aggregate demand and supply is an important model that helps economists in studying various behaviours of the players in the market and at large the economy. The economists will make good use of the model of AD and AS to calculate the gross domestic product in the economy, to establish the inflation rate in the economy and above establish the general growth rate of the economy. The outcomes from the analysis of the model of AD and AS helps the economists to come up with economic policies which can enable the government of the day to make important decisions concerning its economy. For instance, the model will be used by the government to determine the employment level of various factors of production and how they can be combined to produce more better results to stimulate economic growth growth and development.