When planned AD is more/less than AS, then the readjustment process involves changes in AS to match the level of AD while AD remains constant
On the other hand, over-full employment equilibrium and under full employment equilibirum involve changes in AD (change in government expenditure, policy) to match the level of AS while AS remains constant
AM I CORRECT????
Dear Student,
You are correct. because when firms find that output or income(aggregate supply) is more than desired expenditures then firms will cut down their production and income will fall .And when income falls consumption also falls which is a part of aggregate demand.So in situation of less or more of AD , Firms that are supplies tend to act in the economy.
And in the case of full equilibrium firms cannot increase their output so government expenditure which is a part of AD acts in the economy.
Hope this information will clear your doubts about topic.
If you have any more doubts just ask here on the forum and our experts will try to help you out as soon as possible.
Regards
You are correct. because when firms find that output or income(aggregate supply) is more than desired expenditures then firms will cut down their production and income will fall .And when income falls consumption also falls which is a part of aggregate demand.So in situation of less or more of AD , Firms that are supplies tend to act in the economy.
And in the case of full equilibrium firms cannot increase their output so government expenditure which is a part of AD acts in the economy.
Hope this information will clear your doubts about topic.
If you have any more doubts just ask here on the forum and our experts will try to help you out as soon as possible.
Regards