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v0.1.634
NotesEconomicsTopic 3.2
Unit 3 · Macroeconomics · Topic 3.2

IB Economics — Variations in economic activity: aggregate demand and aggregate supply

AD/AS model, business cycles, demand-pull vs cost-push changes, and macro shocks.

Exam technique guidePractice questions

Key concepts in Variations in economic activity: aggregate demand and aggregate supply

Key Idea: Topic 3.2 introduces the AD/AS model — the most important diagram in macroeconomics. It shows how the price level and real GDP are determined, and how shocks affect the economy.

✅ Core definitions

📉 Why AD slopes downward

🔄 What shifts AD?

📊 SRAS vs LRAS

SRAS: Upward-sloping. Shifts with **input costs** (wages, oil). Taxes, subsidies, supply shocks. Short-run price adjustments.

LRAS: Vertical at potential output. Shifts with **productive capacity**. Technology, labour force, capital. Long-run growth.

AD shifts affect actual output (short run). LRAS shifts affect potential output (long run). Know which diagram to draw for each policy.

⚡ Equilibrium and shocks

What you'll learn in Topic 3.2

  • 3.2.1 Aggregate demand
  • 3.2.2 Aggregate supply
  • 3.2.3 Equilibrium and macroeconomic shocks
Suggested study order: Read the notes for each sub-topic below → test yourself with flashcards → attempt practice questions → review exam technique.

Study resources — 3.2 Variations in economic activity: aggregate demand and aggregate supply

3.2.1

Aggregate demand

Notes
3.2.2

Aggregate supply

Notes
3.2.3

Equilibrium and macroeconomic shocks

Notes

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Topic 3.2 Variations in economic activity: aggregate demand and aggregate supply forms a core part of Unit 3: Macroeconomics in IB Economics. Mastering these concepts will strengthen your understanding of connected topics across the syllabus and prepare you for exam questions that require analysis, evaluation, and real-world application.

Frequently asked questions

What does Topic 3.2 Variations in economic activity: aggregate demand and aggregate supply cover in IB Economics?
Topic 3.2 covers variations in economic activity: aggregate demand and aggregate supply as part of the IB Economics syllabus. Students learn key economic concepts, models, and real-world applications that are assessed in Paper 1, Paper 2, and Paper 3 exams.
How should I revise Variations in economic activity: aggregate demand and aggregate supply for IB Economics exams?
Start by reading the micro-topic notes to understand each concept, then use flashcards to memorise key terms and diagrams. Practise drawing and explaining economic models, and work through past paper questions to apply your knowledge under exam conditions.
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3.1 Measuring economic activity and illustrating its variations
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3.3 Macroeconomic objectives
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