Aggregate demand curve

Components of AD: consumption (C) + investment (I) + government spending (G) + net exports (total exports [X] - total imports [M])

C: consumer confidence, interest rates, wealth, income taxes, level of household indebtedness, expectations of future price level

I: interest rates, business confidence, technology, business taxes, level of corporate indebtedness

G: political and economic priorities

X - M: income of trading partners, exchange rates, trade policies

Shifts of the AD curve caused by changes in determinants

costs of factors of production

indirect taxes

Shifts of the SRAS curve

Monetarist/new classical view of the long-run aggregate supply (LRAS) curve

Keynesian view of the AS curve

Inflationary and deflationary/recessionary gaps

Changes in the quantity and/or quality of factors of production

Improvements in technology

Increases in efficiency

Changes in institutions

Macroeconomic equilibrium

Short-run equilibrium

Equilibrium in the monetarist/new classical model

Equilibrium in the monetarist/new classical model — Determination of long-run equilibrium at full employment level of output (potential output)

Equilibrium in the monetarist/new classical model — Automatic adjustment to full employment equilibrium

Equilibrium in the monetarist/new classical model — Unemployment at full employment equilibrium is equal to the natural rate of unemployment

Equilibrium in the Keynesian model

Equilibrium in the Keynesian model — Persistence of deflationary/recessionary gaps: equilibrium level of output might not equal the full employment level of output

Assumptions and implications of the monetarist/new classical and Keynesian models