what is the relationship between aggregate demand and the is/lm model/
Aggregate Demand and Aggregate Supply. â¢The AD-AS model is derived from the IS-LM. model. Â¾The two models are equivalent. Â¾Depending on the particular issue, one model may. prove more useful than the other model. â¢The IS-LM model relates the real interest rate to output. â¢The AD-AS model relates the price level to output.
Therefore, the new equilibrium interest rate is 7.25, and the new equilibrium level. of output is 975, as depicted in Figure 11â14. g. The aggregate demand curve is a relationship between the price level and the. level of income.