Fiscal Policy: Fiscal policy refers to government actions related to taxation and spending that aim to influence aggregate demand. For example, increasing government spending during a recession can boost AD.
Monetary Policy: Monetary policy involves actions taken by central banks to manage money supply, interest rates, and credit conditions with the goal of influencing aggregate demand. For instance, lowering interest rates can stimulate borrowing for investment purposes.
Equilibrium Output: Equilibrium output is the level of real GDP where aggregate demand equals aggregate supply. It represents the point where the economy is in balance, with no upward or downward pressure on prices.