This note extends the IS/LM model to incorporate changes in the aggregate price level and to permit output to be determined by aggregate supply and demand. The note introduces the concept of the full-employment level of output, provides microfoundations that underpin the aggregate supply curve, and discusses the effects of fiscal and monetary policy when the economy is below and above the full-employment level of output. The note concludes by reviewing the exogenous components of the IS/LM-AD/AS model.