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AD-AS Model has a lot of significance in macroeconomics. It explains us that how are price level and output related with the help of the relationship between AD-AS model (i.e. aggregate demand-aggregate supply model). This model is usually used for illustrating the Keynesian Model of business cycle. In this model it is assumed that prices of goods and services are fixed. Factors of production are also not adjusted. It is also assumed that the economy has an excess production capacity i.e. there is unemployment and under utilisation of their capacity.

As we all know AD-AS Model involves several complicated assumptions, effects which are explained with diagrams. It might often get difficult for students to understand the derivation of the AD curve from IS-LM model or the functioning of the price level and output in the AD-AS models. The Assumptions of AD-AS Model Homework Help group of professionals at brings you all the explanations in details.

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