The graphs illustrate an initial equilibrium for some economy. Suppose that the economy experiences a rise in aggregate demand. Use the graphs to illustrate the new positions of AD, SRAS, and LRAS as well as the new short-run and long-run equilibria resulting from this change.

The graphs illustrate an initial equilibrium for some economy. Suppose that the economy experiences a rise in aggregate demand. Use the graphs to illustrate the new positions of AD, SRAS, and LRAS as well as the new short-run and long-run equilibria resulting from this change.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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Question

The graphs illustrate an initial equilibrium for some economy. Suppose that the economy experiences a rise in aggregate
demand. Use the graphs to illustrate the new positions of AD, SRAS, and LRAS as well as the new short-run and long-run
equilibria resulting from this change.
Aggregate price level
Short-Run Graph
ERAS
Real GDP
SRAS
Equilibrium point
AD
Aggregate price level
Long-Run Graph
ERAS
Real GDP
SRAS
Equilibrium point
AD

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Step 1: Introduce the concept of aggregate demand.

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Step 2: Illustrate the changes to the graph.

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