This wk: Put your quantity theory of money knowledge to use in understanding the aggregate demand curve.

Next wk: Use your knowledge of the AD curve to dig into the long-run aggregate supply curve.

The aggregate demand-aggregate supply model, or AD-AS model, can help us understand business fluctuations. In this video, we’ll focus on the aggregate demand curve.

The aggregate demand curve shows us all of the possible combinations of inflation and real growth that are consistent with a specified rate of spending growth. The dynamic quantity theory of money (M + v = P + Y), which we covered in a previous video, can help us understand this concept.

We’ll walk you through an example by plotting inflation on the y-axis and real growth on the x-axis -- helping us draw an aggregate demand curve!

Next week, we’ll combine our new knowledge on the AD curve with the long-run aggregate supply curve. Stay tuned!

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