The DD-AA Model: Multi-market System 

The DD-AA model depicts simultaneous equilibrium in the goods and asset markets. Here, we include these underlying markets in a graphical analysis. A fiscal expansion originates in the goods market and shifts the DD curve, while the resulting output increase restores equilibrium in the money and asset markets and is shown as movement along the AA curve. An increase in money supply shifts the AA curve and weakens the currency so that aggregate expenditure increases and goods market equilibrium is restored. Additional material available at bit.ly/2yO4GUS.