Price\ Level, \ P

Output,\ Y

LRAS

AD¹

AD²

AD³

Short run equilibrium
after negative shock

   Initial 
equilibrium

Long run equilibrium
after price adjustment

Short run equilibrium
after positive shock

Long run equilibrium
after price adjustment

A positive aggregate demand shock

A negative aggregate demand shock

   Initial 
equilibrium

SRAS due to
price rigidity

Aggregate Demand Shock in AS-AD Model

P₁

P₃

P₂

A = Intersect(xAxis, yAxis)
B = Point(xAxis)
C = (0, 8)
a = Segment(A, B)
b = Segment(A, C)
D = Point(a)
E = (4, 7)
c = Segment(D, E)
F = (0, 3.5)
G = (7, 3.5)
d = Segment(F, G)
f = If(2 < x < 6.5, 7.5 - x)
g = If(1 < x < 5.5, 6.5 - x)
H = (3, 3.5)
I = (4, 2.5)
J = (4, 3.5)
h = If(3 < x < 7.5, 8.5 - x)
K = (5, 3.5)
L = (4, 4.5)
M: (1.1, g(1.1))
N: (2.1, f(2.1))
O: (3.1, h(3.1))
u = Vector(H, I)
v = Vector(K, L)
P = (0, 2.5)
j = Segment(P, I)
Q = (0, 4.5)
k = Segment(Q, L)
m = false
n = false
w = Vector(J, H)
z = Vector(J, K)