When is the Macroeconomy in Equilibrium?

An economy is in equilibrium when the aggregate supply is equal to the aggregate demand. How consumer behaviour changes ultimately results in a change in either the supply or demand for goods and services within an economy, and it is this change that defines how employment and inflation rates are affected.
In any economic model, where wages are completely flexible and the economy is at full employment, a rise in aggregate demand will lead to a rise in output and in equilibrium prices (due to consumer competition).
However, the above theory will only prove beneficial to the economy if output remains able to comply with levels of demand. Therefore, if there is an increase in aggregate demand, then aggregate supply will have to increase to maintain monetary balance.
Therefore, if the aggregate demand curve (AD1) shifts continually (AD2) and then (AD3) through the graphical stage of unused capacity, then increased output isn’t necessary at th...