Price
 level

Real GDP

p

p

Y

AD_2

SRAS_2

    The initial position of AD (SRAS) 
is set at the left end (right end) of 
the slider.
    Slide the AD shifter to the right 
to see the effect of an increase in 
AD in the short run.
    Then slide the SRAS shifter to 
the left to see the adjustment back 
to potential GDP (Y_0) in the long 
run. See also how the price level 
has changed from p_0 to p.
    (In this basic model we assume 
that the long-run AS has not 
changed.)

The Short-Run and Long-Run Effects 
 of an Increase in Aggregate Demand

AD_1

SRAS_1

Y_0

p_0

p_0

Y_0

u = Vector((0, 0), (10, 0))
v = Vector((0, 0), (0, 10))
N_L = (5, 0)
N_{L2} = (5, 10)
AD = 0 (slider from 0 to 1.5, step 0.01)
SRAS = 0 (slider from -1.5 to 0, step 0.01)
f(x) = If[1 ≤ x ≤ 9, (0.8 * x) + 1 - SRAS]
g(x) = If[1 ≤ x ≤ 9, ((-0.8) * x) + 9 + AD]
A = Intersect(f, g, (5, 5))
N_X: (0, y(A))
N_Y: (x(A), 0)
b = Segment(N_X, A)
c = Segment(A, N_Y)
N_S = Point(f)
N_D = Point(g)
h(x) = If[1 ≤ x ≤ 9, ((-0.8) * x) + 9]
p(x) = If[1 ≤ x ≤ 9, (0.8 * x) + 1]
B = Intersect(h, p, (5, 5))
N_{BX} = (5, 0)
N_{BY} = (0, 5)
d = Segment(N_{BX}, B)
e = Segment(N_{BY}, B)