Module 20

Economic Policy and the Aggregate Demand–Aggregate Supply Model

In this Module, you will learn to:

• Discuss how the AD–AS model is used to formulate macroeconomic policy

• Explain the rationale for stabilization policy Macroeconomic Policy

• Describe the importance of fiscal policy as a tool for managing economic fluctuations

• Identify the policies that constitute expansionary fiscal policy and those that constitute contractionary fiscal policy