2 How is aggregate demand AD similar to short run aggregate

2. How is aggregate demand (AD) similar to short run aggregate supply (SRAS)?

Solution

Aggregate Demand is the relationship between the aggregate price level and the quantity of output.

Short-run Aggregate Supply (SRAS) shows the different quantities of real output in the short-run that will be supplied at different prices.

A change in the price level brought about by a shift in AD results in a movement along the short run AS curve. If AD rises, we see an expansion of SRAS; if AD falls we see a contraction of SRAS.