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The versatility of the amount of additional aggregate demand needed to achieve full employment after allowing for price-level changes is the AD shortfall. Aggregate demand must increase by the amount of the AD shortfall in order to achieve full employment. Therefore, the AD shortfall is the fiscal target.
How do the economy achieve this? What factors are relevant to make such price - level changes? Where is focus needed to make policy options for increasing aggregate demand by the desired amount?
The dilemma here is if aggregate demand increased by the amount of the GDP gap, possibility of equilibrium would occur - leaving the economy short of full employment. It is vital that output is pushed up ( increased relatively) while prices are being increased by demand.
Now, what has to be eliminated then? Is it the AD shortfall which is the fiscal target for achieving full employment? We must therefore agree that so long as the AS curve (increases) slopes upward, the corresponding increase in aggregate demand by more than the size of the GDP gap ( for example, 800 billion US $ per year ) supports to achieve full employment . Thus, a larger dose of fiscal stimulus might just work fine in such economic pattern.
