Answer :
Final answer:
Aggregate supply and aggregate demand help us understand inflation and recessions in macroeconomics.
Explanation:
Aggregate supply and aggregate demand help us understand two major problems in macroeconomics: inflation and recessions.
Aggregate supply refers to the total supply of goods and services in an economy, while aggregate demand represents the total demand for those goods and services. By analyzing the interaction between aggregate supply and demand, we can understand how changes in the economy impact the price level and output.
For example, when aggregate demand exceeds aggregate supply, it leads to an increase in prices known as inflation. On the other hand, when aggregate demand falls below aggregate supply, it results in a decline in output and employment, leading to a recession.
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