ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The intersection of the aggregate supply and aggregate demand curves shows the equilibrium level of real GDP and the equilibrium price level in the economy. At a relatively low price level for output, firms have little incentive to produce, although consumers would be willing to purchase a large quantity of output.

Detailed explanation-2: -The intersection of the economy’s aggregate demand curve and the long-run aggregate supply curve determines its equilibrium real GDP and price level in the long run.

Detailed explanation-3: -Macroeconomic equilibrium occurs in an economy when aggregate demand is equal to aggregate supply.

Detailed explanation-4: -When the AD curve intersects the LRAS curve, the economy has reached long-run equilibrium. Any change in the AD curve only affects the price level, but output remains constant in the long run. Because the economy lacks the resources to raise output beyond a certain point, the output cannot be increased or lowered.

Detailed explanation-5: -The Aggregate Demand and Aggregate Supply Equilibrium provides information on price levels, real GDP, and changes to unemployment, inflation, and growth as a result of new economic policy.