The Nature of the Adas Model Based on the Islm Model

The aggregate demand and supply model (ADAS) is interpreted as a synthesis of the Keynesian and neoclassical models. It uses the ISLM model, without explaining its nature, to derive aggregate demand (AD). It is combined with an aggregate supply (AS) curve to explain price-inflation and output dynamics. This paper argues that neither the AD nor the AS curve is conceptually the same as its microeconomic counterpart and that ADAS is not a synthesis. In fact, ADAS implies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function