In the dynamic ad-as model, if the economy is at point a in year 1 and is expected to go to point b in year 2, and the federal reserve pursues no policy, then at point b there is a pressure decrease in rates.
It is based on John Maynard Keynes' theory, which he published in his book The General Theory of Employment, Interest, and Money. It is one of the most commonly used simplified representations in modern macroeconomics, and it is utilized by a wide range of economists, from libertarian, monetarist proponents of laissez-faire, such as Milton Friedman, to post-Keynesian supporters of economic interventionism, such as Joan Robinson. The AD/AS model is used to demonstrate the Keynesian business cycle concept. The two curves' movements may be used to forecast the effects of various exogenous events on two variables: real GDP and the price level.
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