DAD–SAS model

The DAD–SAS model is a macroeconomic model based on the AD-AS model but that looks at the different incomes at different inflation levels.

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:

$$\pi=\mu-bY+bY_{-1}+h(\Delta i^W+\Delta \epsilon^e)$$

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

$$\pi=\epsilon+\pi^W-bY+bY_{-1}+\gamma \Delta Y^W+\delta \Delta G-f(\Delta i^W+\Delta \epsilon^e)$$

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:

$$\pi=\pi^e+\lambda(Y-Y*)$$

DAD-SAS-Modell