The graph below shows the aggregate demand (AD) and short-run aggregate supply (SRAS) curves for an economy. Assume that the economy is initially in short-run and long-run equilibrium at $6 trillion. That is, the economy's natural rate of output is $6 trillion per year.
8.1. Suppose the government increases spending at full employment output. Shift one of the curves to show the SHORT-RUN effect of an increase in government spending.
Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther. When you are satisfied with your answer, click the Submit Answer button.
Which curves will shift?
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