Recap

This past week, we completed our discussion of the model of aggregate demand and aggregate supply (AS-AD). We use the AD-AS model to describe the state of an economy and how certain factors affect the expenditure components of GDP through changes in AD and AS.

We learned the three states of an economy as being in long-run equilibrium, recessionary gap or an inflationary (expansionary) gap. You learned to differentiate between an economy's short-run equilibrium and long-run equilibrium.

The AD-AS model provides a starting place for our discussion on the various schools of economic thought, as well as further understanding of the phases of the business cycle.

Looking Ahead

In the coming week, your study guides are due and we will review for your second exam. Then, we begin our discussion of the two opposing schools of economic thought and their influence on the discipline. Please make sure to bring your completed study guides to class as there are no late submissions allowed.