The dynamic model of aggregate supply and aggregate demand explain inflation When the aggregate supply of goods and services decreases because of an increase in production costs, it results in cost-push inflation. in order to compensate, the increase in costs is passed on to consumers, causing a rise in the general price level: inflation
AD measures the entire demand for all finished commodities and services, produced in an economy at a particular time period.
AS measured the entire supply of services and commodities produced within an economy at a given price level in a particular time period.
Aggregate amount or score is made up of several smaller amounts or scores added together.
Inflation is the rate of increase in prices over a given period of time.
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