aggregate demand (AD) the amount of total spending on domestic goods and services in an economy aggregate demand (AD) curve the total spending on domestic goods and services at each price level aggregate demand/aggregate supply model a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level aggregate supply (AS) the total quantity of output (i.e. real GDP) firms will produce and sell aggregate supply (AS) curve the total quantity of output (i.e. real GDP) that firms will produce and sell at each price level full-employment GDP another name for potential GDP, when the economy is producing at its potential and unemployment is at the natural rate of unemployment intermediate zone portion of the SRAS curve where GDP is below potential but not so far below as in the Keynesian zone; the SRAS curve is upward-sloping, but not vertical in the intermediate zone Keynes’ law “demand creates its own supply” Keynesian zone portion of the SRAS curve where GDP is far below potential and the SRAS curve is flat long run aggregate supply (LRAS) curve vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run neoclassical economists economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run neoclassical zone portion of the SRAS curve where GDP is at or near potential output where the SRAS curve is steep potential GDP the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions Say’s law “supply creates its own demand” short run aggregate supply (SRAS) curve positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed stagflation an economy experiences stagnant growth and high inflation at the same time