Explain output market equilibrium schedule (DD) and asset market equilibrium schedule (AA) curves and their resulting equilibrium

Explain the output market equilibrium schedule (DD).

Output market equilibrium denotes all of the combinations of output as well as the rate of exchange in which the output market is in a short run-equilibrium. It means the aggregate demand equals the total output.

Explain the asset market equilibrium schedule (AA)

It is a curve that plots the exchange rate of equilibrium for every possible level of GNP that prevails. It can also refer to the combination of both the GNP level and the exchange rate, which maintains balance in the market asset.

Why does DD slope upwards?

DD slopes upwards because the rise in the rate of exchange results in an increase in output.

Why does AA slope downwards?

AA slopes downwards because when the output rises, it causes the home interest rate to grow and appreciation in the domestic currency.