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10 . Short-run equilibrium and long-run aggregate supply The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $5 trillion. The curves are labelled a, b, c, and d. Three points on the graph are also indicated by grey stars and labelled K, L, and M. 100 90 80 70 PRICE LEVEL 60 50 40 30 20 2 3 5 REAL GDP (Trillions of dollars) 6 Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown. Description a b C d Not Shown Short-run aggregate supply (SRAS) when there is a recessionary gap O O O O O Short-run aggregate supply (SRAS) when there is an inflationary gap O O O O O Aggregate demand (AD) O O O O O Long-run aggregate supply (LRAS) O O O O O Short-run aggregate supply (SRAS) when the economy is at long-run equilibrium O O O O OThe following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 120, and the quantity of output demanded is $500 billion. Moving up along the aggregate demand curve from point A to point B, the price level rises to 140, and the quantity of output demanded falls to $300 billion. 170 180 150 B 140 PRICE LEVEL 130 A 120 110 AD 100 90 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars)