Along the AD curve, real GDP increases as the price level decreases. Changes in the expense level will cause a movement along the AD curve.
When the output is smaller than the aggregate order, it means consuming families are saving less. This will result in an unplanned decrease in inventories of unsold stock. Firms will expand production by employing more workers until AS and AD once again becomes equal, i.e., until the balance is restored (AD = AS). Negative shocks reduce output and increase unemployment. Positive shocks improve production and reduce unemployment.
An increase in AD will raise the price level. On the other hand, an expansion in AS will decrease the price level. If the AD increases more than the AS, then, the price level will rise. Contrariwise, if the AS change is more than the AD change, the price level will decline.
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