DAD–SAS model

DAD curve

The DAD (Dynamic aggregate demand) curve is in the long run a horizontal line called the EAD (Equilibrium aggregate Demand) curve. The short run DAD curve at flexible exchange rates is given by the equation:

π = μ − b Y + b Y − 1 + h ( Δ i W + Δ ϵ e )

The short run DAD curve at fixed exchange rates is given by the equation:

π = ϵ + π W − b Y + b Y − 1 + γ Δ Y W + δ Δ G − f ( Δ i W + Δ ϵ e )

SAS curve

The SAS (Surprise aggregate supply) curve is in the long run a vertical line called the EAS (Equilibrium aggregate Supply) curve. The short run SAS curve is given by the equation:

π = π e + λ ( Y − Y ∗ )