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1. The main variables used in macroeconomics are output, price level, unemployment, and interest rates. Changes in these variables are interrelated in various ways. A.

1. The main variables used in macroeconomics are output, price level, unemployment, and interest rates. Changes in these variables are interrelated in various ways.

A. The AD/AS model is central to macroeconomic analysis. This model describes changes in the economy in terms of the price level and output (RGDP).

I. Consider an economy that is in short-run disequilibrium, with output well below the full-employment level. Describe how that economy would return to long-run equilibrium. Use graphs to explain your answer.

II. Explain how supply shocks and demand shocks affect the AD/AS model.

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