The primary cause of shifts in the economy is aggregate demand. Recall that aggregate demand can be affected by consumers both domestic and foreign, the Fed, and the government. For a review of the shifters of aggregate demand, see the aggregate demand . In general, any expansionary policy shifts the aggregate demand curve to the right while any contractionary policy shifts the aggregate demand curve to the left. In the long run, though, since long-term aggregate supply is fixed by the factors of production, short-term aggregate supply shifts to the left so that the only effect of a change in aggregate demand is a change in the price level. Let's work through an example. For this example, refer to . Notice that we begin at point A where short-run aggregate supply curve 1 meets the long-run aggregate supply curve and aggregate demand curve 1. The point where the short-run aggregate supply curve
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