Economic fluctuations

The following graph shows the economy in long$-$run equilibrium at an expected price level of $120$ and potential output of $$300$ billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase.

Shift the short$-$run aggregate supply $($SRAS$)$ curve or the aggregate demand $($AD$)$ curve to show the short$-$run impact of the economic prosperity abroad on the grapht.

Note: Select and$-$drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and sit snaps back to its original position, just$-$drag it a little farther:

$97$

AD

$q,$

SRAS