Supply and Demand: A Dual Perspective

The biggest fight in economics is whether supply creates its own demand, or if demand creates

its own supply. Turns out, they're both right—it just depends on the situation.

Economists use the AD/AS model, which is a supply and demand graph for the whole country.

Where the lines for total supply and total demand cross tells us our GDP and price level.

If we're in a recession, we're in the "Keynesian zone," where demand is boss and more spending creates

jobs. But if the economy is at full capacity, we're in the "Neoclassical zone," where more

demand just means inflation.