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Understanding Aggregate Supply Diagrams in Economics

Learn about the effects of increases in aggregate supply on price levels, expansion along the AD curve, and causes of cost-push inflation. Discover how economic growth stems from a nation's productive potential.

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Understanding Aggregate Supply Diagrams in Economics

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  1. Aggregate Supply Diagrams Unit 2 Economics Revision

  2. Price Level LRAS Rise in aggregate supply causes an expansion along the AD curve SRAS1 SRAS2 AD = C+I+G+X-M Real National Output (Y) Ye Y1 Y2

  3. LRAS Average Price Level SRAS2 SRAS1 A fall in the exchange rate can cause import prices to rise – a cause of cost-push inflation P2 P1 AD = C+I+G+X-M Real National Output (Y) Y1 Y2 YP

  4. LRAS2 LRAS1 Average Price Level Economic growth comes from an increase in a country’s productive potential SRAS AD3 AD2 AD1 Real National Output (Y) Y1 Y2 Y3

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