The Aggregate Demand and Aggregate Supply Model

Changes in the following non-price level factors or determinants cause changes in aggregate demand and shifts of the entire aggregate demand (AD) curve.

Autonomous consumption (autonomous consumer spending) Ca, which depends upon:

-consumer nominal wealth
-consumer expectations and confidence concerning job security and future income
-money supply
-autonomous taxes Ta (e.g., sales and property taxes)
Planned investment spending I, which depends upon:

-real interest rates (i.e., changes in interest rates not caused by changes in the price level)
-business profit expectations or the expected rate of return
-business taxes
-money supply

Government spending G:

Net export spending X:

Changes in the following factors will change SR and LR aggregate supply and shift the SRAS and LRAS curves:

Resource endowments
Permanent changes in international trade barriers in resource markets
Technology and education
Permanent changes in business regulations and taxes


Temporary or short run changes in input prices and resource costs will shift the SRAS curve without changing the full employment level of real GDP and shifting the LRAS curve.