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What is meant by equilibrium in the macroeconomy?
When AD equals AS
How do changes in AD affect macroeconomic performance?
-If firms have less confidence or there is a recession, AD might shift inwards, causing price level to fall
-If AD increases, the price level and level of national output both increase.
-When there is insufficient AD, you get negative output gap which means there is unemployment
-If the economy becomes more productive, or if there is an increase in efficiency, supply will shift to the right and price level and national output increase
-If AS shifts inwards, price increases and national output decreases.
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