The document uses IS-LM diagrams to show how fiscal and monetary policy can impact aggregate demand and output. It discusses: 1) An increase in government purchases shifts the IS curve right, raising income and interest rates in the short-run. 2) A decrease in taxes also shifts the IS curve right, raising income and interest rates. 3) An increase in the money supply shifts the LM curve down, lowering interest rates and raising income. 4) It introduces aggregate demand curves derived from the intersection of IS and LM curves to analyze how prices and output are impacted by these policies in the short and long-run.