Compléter Module 19Version en ligne Macroeconomic Equilibrium - Fill-in-the-Blank par Zachary Foust 1 fluctuations together To understand the behavior of the economy , economists put the aggregate supply curve and the aggregate demand curve . The AD - AS model is the basic model that economists use to understand economic . 2 intersect output level price shifts The point at which the AD and SRAS curves is the short - run macroeconomic equilibrium . The aggregate at short - run macroeconomic equilibrium is the short - run equilibrium aggregate price level . The level of aggregate at short - run macroeconomic equilibrium is the short - run equilibrium aggregate output . The short - run equilibrium aggregate output and the short - run equilibrium aggregate price level can change because of of either the AD curve or the SRAS curve . 3 combination positive shifts negative negative positive shifts An event that the aggregate demand curve is known as a demand shock . A demand shock shifts the aggregate demand curve to the left , leading to lower aggregate output and a lower aggegate price level . A demand shock shifts the aggregate demand curve to the right , leading to higher aggregate output and a higher aggregate price level . An event that the short - run aggregate supply curve is known as a supply shock . A supply shock shifts the short - run aggregate supply curve to the left , leading to lower aggregate output and a higher aggregate price level . The of inflation and falling aggregate output is known as stagflation . A supply shock shifts the short - run aggregate supply curve to the right , leading to higher aggregate output and a lower aggregate price level . 4 right left difference long below on high long long above short potential low long Output At the intersection of all three curves ( SRAS , LRAS , and AD ) short - run equilibrium aggregate output is equal to output . When the point of short - run macroeconomic equilibrium is the long - run aggregate supply curve , the economy is experiencing a situation known as long - run macroeconomic equilibrium . When aggregate output is potential output , the economy faces a recessionary gap . A recessionary gap inflicts a great deal of pain because it corresponds to unemployment . In the face of high unemployment , nominal wages eventually fall , ultimately leading the short - run aggregate supply curve to shift to the . The economy is self - correcting in the - run . When aggregate output is potential output , the economy faces an inflationary gap . Unemployment is in order to produce this higher level of aggregate output . In the face of low unemployment , nominal wages will rise , ultimately lead the short - run aggregate supply curve to shift to the . Again , the economy is self - correcting in the - run . The output gap is the between actual aggregate output and potential output . gap = actual aggregate output - potential output In the - run , the economy is self - correcting . Shocks to aggregate demand affect aggregate output in the - run but not in the - run .
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