Usually when I read online, I see the following repeated frequently: aggregate demand is equal to GDP. I understand that aggregate expenditures is the aggregate demand at a particular price level, and that sometimes AE will exceed GDP (causing growth in GDP) and vice versa, according to the Keynesian cross model.

Obviously at equilibrium, AS = AD = GDP. But I've never seen anywhere that aggregate supply in general is equal to GDP. Yet this definition makes more sense to me.

One definition that I've seen for aggregate supply is "the total supply of goods and services produced within an economy at a given overall price level in a given time period" (source). Another that I've seen is "the total supply of goods and services that firms in a national economy plan on selling during a specific time period" (Wikipedia).

Which of these definitions is correct? If it's the latter, I can see some obvious differences (it doesn't include inventories, for example). But if it's the former, that seems to be the same as GDP: "the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time." To rephrase, how is the concept of aggregate output distinguished from aggregate supply? I guess the first two questions should naturally answer this last one, since aggregate output is GDP.

  • $\begingroup$ Aggregate supply may sometimes be used to add together domestic output plus imports; similarly aggregate demand could be used to add together intermediate consumption, final consumption, capital formation, and exports, and should balance aggregate supply (subject to an adjustment for taxes on products). GDP is domestic output minus intermediate consumption, i.e. aggregate supply minus intermediate consumption and imports. $\endgroup$ – Henry Apr 6 at 14:09

Per my understanding, AS and GDP are the same thing. However, the term AS is more often used in the context of "curves" to describe the relationship between inflation rate and the supply side.


Aggregate supply is a relationship of price level and output. It is a function, or a curve, or a table. It is not a single value. If we know a particular price level, then we can determine the level of output that would correspond with that. The GDP for 2006 is determined by plugging in the price level of 2006 to the AS curve for 2006, and seeing what output is produced at that price level.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.