> perhaps someone could explain how the concepts of
aggregate demand, etc., are useful.
> Pat Gunning


Michel Parkin's text Macroeconomics has an elegant
4-graph model of the macroeconomy, the 4th graph being
of  aggregate supply and demand (AS and AD), the
variable being the usual price level (p) and output
(y).

The aggregate demand is most simply the total demand
for goods (y) given some supply of money, as a
function of the price level.  Given some fixed MV
(money times velocity), lower price levels increase
the purchasing power of money and thus the aggregate
quantity demanded of goods is greater.  Hence the
downward sloping AD. 

A greater MV shifts AD out.  If AS is vertical, then
greater MV shifts AD up to cross AS at a higher price
level, with no change in output.  In the Parkin model,
output has already been determined by the labor market
(graph 1) and the aggregate production function (graph
2, y as a function of labor).  The third graph simply
transfers y from the vertical to the horizontal axis.

Thus the usefulness of graphed AD and AS is to show
how  the equilibrium price level is set at the
intersection of AS and AD, and the effect of shifting
AS and AD on the price level and (if AS is not
vertical) on y.

Of course if you totally reject equilibrium
constructs, the model will be of no use to you.  But
in my judgment, it has pedagogic value for
understanding the relationships among the money
supply, output, and the price level, along with the
effects of demand-side and supply-side policies.

Fred Foldvary