Aggregate Demand and Aggregate Supply

    OCR
    GCSE

    The Aggregate Demand (AD) and Aggregate Supply (AS) model constitutes the core analytical framework for macroeconomics. It determines the equilibrium price level and real national output (GDP) through the interaction of total planned expenditure and the economy's productive capacity. Mastery requires distinguishing between short-run fluctuations caused by external shocks and long-run growth determined by factors of production. Candidates must navigate the theoretical dichotomy between Keynesian and Neo-Classical/Monetarist interpretations of the Long Run Aggregate Supply (LRAS) curve to evaluate the efficacy of demand-side versus supply-side policies.

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    Objectives
    4
    Exam Tips
    3
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    What You Need to Demonstrate

    Key skills and knowledge for this topic

    • Award marks for accurate labeling of axes (Price Level, Real GDP) and curves (AD, AS) in all diagrams
    • Credit logical chains of reasoning connecting a change in a component (e.g., lower interest rates) to the final macroeconomic impact
    • Responses must distinguish between cost-push and demand-pull inflation mechanisms when shifting curves
    • High-level responses must evaluate the extent of the impact based on the elasticity of the curves or the magnitude of the shock

    Marking Points

    Key points examiners look for in your answers

    • Award marks for accurate labeling of axes (Price Level, Real GDP) and curves (AD, AS) in all diagrams
    • Credit logical chains of reasoning connecting a change in a component (e.g., lower interest rates) to the final macroeconomic impact
    • Responses must distinguish between cost-push and demand-pull inflation mechanisms when shifting curves
    • High-level responses must evaluate the extent of the impact based on the elasticity of the curves or the magnitude of the shock

    Examiner Tips

    Expert advice for maximising your marks

    • 💡Memorise the AD formula (C+I+G+(X-M)) and write it down immediately when analysing demand-side shocks
    • 💡When drawing diagrams, use dotted lines to show the change from equilibrium E1 to E2 clearly on both axes
    • 💡For 12-mark evaluation questions, structure the answer as: Analysis of impact, Counter-evaluation (it depends on...), and a final supported judgment
    • 💡Allocate 1 minute per mark; do not over-write on the multiple-choice or short-answer sections

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Confusing microeconomic terms (Price/Quantity) with macroeconomic terms (Price Level/Real GDP) on axes
    • Asserting that a change in price level shifts the AD curve rather than causing a movement along it
    • Failing to link the change in a component (e.g., Investment) explicitly to the formula AD = C + I + G + (X - M)

    Study Guide Available

    Comprehensive revision notes & examples

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    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    Calculate
    State
    Explain
    Analyse
    Evaluate
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