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Exhibit: Shift in Aggregate Demand
-(Exhibit: Shift in Aggregate Demand) In this graph, initially the economy is at point E, with price P₀ and output Y. Aggregate demand is given by curve AD₀, and SRAS and LRAS represent, respectively, short-run and long-run aggregate supply. Now assume that the aggregate demand curve shifts so that it is represented by AD₁. The economy moves first to point ______ and then, in the long run, to point ______.

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Exhibit: Shift in Aggregate Demand

-(Exhibit: Shift in Aggregate Demand) In this graph, initially the economy is at point E, with price P₀ and output Y. Aggregate demand is given by curve AD₀, and SRAS and LRAS represent, respectively, short-run and long-run aggregate supply. Now assume that the aggregate demand curve shifts so that it is represented by AD₁. The economy moves first to point ______ and then, in the long run, to point ______.

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In the short run, the economy moves to point C due to the shift in aggregate demand to AD1. In the long run, it adjusts to point B as the economy returns to long-run equilibrium.

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