3.6 Changes in the AD–AS Model in the Short Run
AD shifts move output and the price level in the same direction; SRAS shifts move them in opposite directions, a leftward SRAS shift causes stagflation.
An AD shift moves real GDP and the price level TOGETHER: AD right raises both (demand-pull inflation), AD left lowers both. Anything changing C, I, G, or Xn, confidence, wealth, policy, foreign incomes, works through AD.
An SRAS shift moves them in OPPOSITE directions: SRAS left (say, an oil-price spike) raises the price level while cutting output, stagflation, driven by cost-push inflation. SRAS right lowers the price level while raising output.
To pick the right curve from a scenario, ask whether the change hits spending (AD) or production costs (SRAS). Then read off the four outcomes: output, price level, unemployment (opposite of output), and the resulting gap.
Key terms for 3.6
Drag the curves above, or open the full AD/AS Model sandbox. Then draw it yourself for a graded check or watch the step-by-step walkthrough. Teaching this? Put this graph on your own class page, free.
Explaining stagflation with an AD shift. AD shifts move output and the price level in the same direction, only a leftward SRAS shift produces the rising-prices-plus-falling-output combination.
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A full lesson plan for 3.6, with timings, a warm-up, guided practice and an exit ticket.
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