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in an economy , AD is less than AS . Is economy in equilibrium? if not, explain changes that will bring economy at equilibrium? (6 marker)

Hey Radika,

Answer provided by Prity is correct. However, for diagrammatic explanation, follow the below mentioned link and scroll down to the topic 'When Aggregate Supply exceeds Aggregate Demand (AS>AD)'.

https://www.meritnation.com/cbse/class12-commerce/studymaterial/economics/introductory-macroeconomics/income-determination/341_1989_5845#slide3_adjustment-mechanism

Keep Posting!!

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No, when AD is less than As an economy is not on equilibrium... according to AD=As approach, equilibrium GDP is achieved when AS (aggregate supply) = AD (aggregate demand)
when AS is more than AD (AS>AD), flow of goods and services in the economy tends to exceed their demand. as a result, some goods would remain unsold. To clear unwanted stock, the producers would plan a cut in production. consequently, AS would reduce to become equal to AD. this is how AS itself equal to AD...

in 6 mark draw dig. for explanation...
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