This is the logic that is applied to all shifts in aggregate demand

This is the logic that is applied to all shifts in aggregate demand

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the logic that is applied to all shifts in aggregate demand. The long-run  equilibrium is always dictated by the intersection of the vertical long-run aggregate  supply curve and the aggregate demand curve. The short-run equilibrium is always  dictated by the intersection of the short-run aggregate supply curve and the aggregate  demand curve. When the aggregate demand curve shifts, the economy always shifts  from the long-run equilibrium to the short-run equilibrium and then back to a new long- run equilibrium. By keeping these rules and the examples above in mind it is possible to  interpret the effects of any aggregate demand shift in both the short run and in the long  run.  Shifts in Aggregate Supply in the AS-AD Model  Shifts in the short-run aggregate supply curve are much rarer than shifts in the  aggregate demand curve. Usually, the short-run aggregate supply curve only shifts in 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

This is the logic that is applied to all shifts in aggregate demand

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online