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What is the relationship between the aggregate supply/aggregate demand model and the multiplier model?
How do the two models relate to each other?
The multiplier model is often used in conjunction with the aggregate supply/aggregate demand model to explain how changes in spending can affect the level of output, employment, and prices in the economy. When there is a change in spending, say an increase in government spending, this initial increase is multiplied by the multiplier to estimate the total effect on the economy's output and employment.